Scale is not all it is cracked up to be. Britain’s three biggest companies - BP, HSBC and Vodafone – have all gone through the mill in various ways over the past few years, the supposed advantages of their size offset by problems of trying to manage, control and inspire such sprawling beasts. So BHP Billiton’s plan to take over Rio Tinto to create what would be Britain’s biggest company, weighing in at £166 billion, is not necessarily the no-brainer its adherents are suggesting.

The City’s investment bankers, lawyers and other advisers could hardly contain their joy yesterday that that rare thing, a 12-digit deal, was on the cards. The merest slither has to be shaved from such huge transactions to guarantee bonus heaven. There hasn’t been a UK-centred deal quite this large since Vodafone’s purchase of Mannesmann seven years ago.

But this is not just an impossible fantasy of fee-hungry bankers. There could be attractive synergies from the deal. Cost savings can be squeezed from combining the contiguous iron ore mining operations in Western Australia and adjacent coal fields in Eastern Australia. A combined BHP/Rio would have the scale to take on the biggest projects in the politically riskiest corners of the planet. Culturally and minerally, they look a good fit. Both are themselves products of Anglo-Australian mergers. The differences in emphasis – Rio is huge in bauxite and aluminium, while BHP is more dominant in coal – give plenty of common ground while leaving room for some fruitful cross-fertilisation of operations.

The combined market share in some product areas will give them extra clout in negotiations with major customers. But it is of course this additional market power that will set alarm bells jangling from Beijing to Brussels. By some measures the combined group will be unearthing one third of the planet’s iron ore and coal – a concentration of supply that will unnerve the world’s steelmakers. For such a large portion of two such essential raw materials to come from just one source could be explosive, politically.

BHP will have to agree to some major disposals to win the green light from regulators, though the wording of its statement yesterday suggests it has gone into the issue in detail and is confident an accommodation can be reached.

The more immediate problem for BHP chief executive Marius Kloppers is to get Rio onside. Its rejection announcement yesterday was a model of cool disinterest but not worded so icily that BHP shouldn’t even consider asking for a second date. The share exchange arrangement tabled by BHP would value each Rio share at £52.68. Rio shares soared to £52.96 yesterday suggesting traders believe a deal is possible. But there is a difficulty. To lure Rio to the negotiating table and to make the divvying up of the top jobs easier, BHP is offering a premium price to Rio that reduces the share of the benefit of the deal enjoyed by its own shareholders. Any further sweetening would shrink the prize for BHP still further.

BHP’s own shares fell 6 per cent yesterday, illustrating the difficulty of pushing the deal to a happy conclusion. Its shareholders will be legitimately asking why this shouldn’t be a merger of equals, so that both sets of shareholders share equally in the spoils. The BHP camp is hoping that because two thirds of investors own shares in both companies, what they worry about losing on BHP they recoup on their Rio stake. But merger efforts have faltered before. There is still a very long haul to get this bulk carrier safely into port.

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