Australia’s BHP Billiton Could Take Out Rival Rio

Shares in Rio Tinto and BHP Billiton surged early as a second investment bank  threw open the possibility the mining giants could be the latest subjects in a market bursting with acquisition speculation.

An analyst at Citigroup published a note saying BHP, the world’s biggest miner, could afford the A$100 billion-plus needed to take out its smaller London-based rival Rio Tinto.

Rio Tinto’s strong cash flow could also make it an attractive target for private equity firms, Citigroup analyst Clarke Wilkins said in the report dated Friday.

“But we think BHP Billiton is a much more likely bidder given synergies and nationalistic control issue of Australian assets,” the report said.

Merrill Lynch analyst Vicky Binns last week said in a report a private equity tilt at BHP could deliver “attractive returns.”