BHP Billiton Ltd/Plc launched a hostile $147.4 billion bid for mining rival Rio Tinto Ltd/Plc on Wednesday, in what could be the second biggest takeover in corporate history.

A marriage of the two mining giants would create the world's third-richest company, with a market capitalisation eclipsed only by Exxon Mobil and General Electric.

It would also create a company that dominates world supplies of dozens of key minerals, raising concerns among industrial buyers from Europe to China that one company would have too much clout on pricing.

BHP sweetened its initial approach by 13 percent, offering 3.4 of its shares for every Rio share. In November, it offered three shares for one, but failed to persuade the Rio board to agree to a friendly merger.

"The Rio Tinto shareholders will now decide," BHP chief executive Marius Kloppers said.

BHP, which posted a 2.4 percent drop in first-half profit to $6.017 billion, needs at least 50 percent of holders of Rio's Australian and London shares to accept.

"This is our first and only offer," Kloppers told a briefing, though he later would not say if that meant it was the final one.

"I think it's closing a door that shouldn't have been closed," said Ken West, a partner in Perennial Growth Management.

Rio was trading at a share ratio to BHP close to the offer, suggesting investors were betting Kloppers would stick with 3.4 shares for one.

Some analysts were sceptical the bid would be successful. "Given our market conditions and the outlook, if you look at comparative mergers and acquisitions, it probably is not going to get there," said Perennial's West.

Kloppers said the Rio board refused to discuss a merger before making the offer, but believed the offer still held widespread support among Rio shareholders, 60-70 percent of whom also hold BHP shares.

As an added incentive, Kloppers promised a $30 billion share buyback if the deal goes through. BHP said Rio shareholders would hold 44 percent of a merged entity, compared with 36 percent in last year's initial approach.

The offer equates to a 45 percent premium to Rio's stock price in November before BHP first raised the idea of a union.

"It's a lot fairer than the offer we've had before. It's by no means a knock-out offer," said Bertie Thomson, a fund manager at Aberdeen Asset Management, who holds both Rio and BHP shares.

Rio said in a statement it was considering the offer and advised its shareholders not to take any action. Rio chief executive Tom Albanese had called the initial BHP proposal "dead in the water" and "ballparks away" from a realistic offer.

Shares in BHP fell 5.8 percent to A$37.36 by midday, while Rio rose 1.5 percent to A$129.20.

Rio Tinto has long opposed BHP's overtures, arguing it was better off as an independent company, digging its own iron ore mines and churning out hundreds of thousands of tonnes of copper, zinc and aluminium.

Key customers for both companies, particularly steel mills in China and Japan, which buy hundreds of millions of tonnes of iron ore each year, have raised concerns about the potential dominance of a merged group. "The offer should be enough to get BHP talking to Rio," said Rob Patterson, managing director of fund manager Argo Investments. "We think to raise the offer to that degree probably makes sense."  -Reuters