LONDON (MarketWatch) -- Shares of BHP Billiton and Rio Tinto rallied on Friday, responding to a big spike in metals prices as well as a Merrill Lynch report suggesting that BHP could be torn apart and sold at a 30% premium, while Reuters Group surged after confirming it has received a takeover approach.
Among miners, gains were actually stronger for Rio Tinto (UK:RIO: news, chart, profile) (RTP : rio tinto plc sponsored adr
RTP253.65, +5.66, +2.3%) , up 3.9%, compared to a 3.1% advance in BHP Billiton (UK:BLT: news, chart, profile) (BHP : bhp billiton ltd sponsored adr
"We are not proposing that BHP will be an imminent target of a private-equity bid -- the risks may be too great and the commitment for both debt and equity is likely too large. However, our scenario analysis does illustrate that a private-equity bid for the largest stock in our sector can deliver attractive returns," the analyst said.
"We are believers in the 'super cycle,' and expect commodity prices to stay above historic averages for years to come. Therefore, it seems to us inevitable that private-equity attentions will turn to the mining sector," said the report, authored by Vicky Binns and Duncan Hay. See Ratings Game.
Separately, J.P. Morgan suggested in an analyst note that if spot prices held existing levels for two years, its valuation of BHP would be lifted by a further 30%.
There also was a big run-up in metals prices right after the London close Thursday to help miners. Gold futures rose $9 an ounce on Thursday, though in electronic trading Friday some of those gains were eroded.