Oct. 29 (Bloomberg) -- Cemex SA, the world's third-largest cement maker, may have to increase its unsolicited $12.8 billion bid for Rinker Group Ltd., the highest cash offer ever made for an Australian company, investors said today.

American depositary receipts of Sydney-based Rinker, the biggest supplier of concrete blocks in Florida, closed at the equivalent of A$18.51 on Oct. 27, exceeding the Mexican company's offer of A$17 ($13) a share. While Cemex's bid was 16 percent above Rinker's last share price in Sydney, it's 21 percent below the stock's record in April.

``Realistically, they're going to have to raise their bid, given that the offer is below the highs seen earlier in the year and the ADRs have traded up above the offer,'' said Atul Lele, who helps manage $307 million at White Funds Management in Sydney, including Rinker shares. ``Investors would be expecting a higher offer to come through.''

Cemex Chairman Lorenzo Zambrano, 62, has targeted Rinker because of its strong market position in the U.S., which account for more than 80 percent of the Australian company's earnings. The cement maker will meet with Rinker management and investors to gain their support for the offer, Juan Pablo San Agustin, senior vice president of corporate strategic planning, told reporters in Sydney today.

``I prefer to characterize this as a recommended offer, not hostile,'' San Agustin said in a telephone briefing. ``The offer fully values what Rinker is worth,'' he said, declining to say whether the bid was final.

`Maximum Value'

About 60 percent of Rinker's shares are held in Australia, according to the company's annual report. Cemex has bought about 1,000 shares so far, San Agustin said. The takeover is subject to its acquisition of more than 90 percent of Rinker.

Emilio Gonzalez, chief investment officer of Rinker's biggest investor, Perpetual Trustees Australia Ltd., said it was too early for him to say whether he will endorse the deal. Perpetual owned 10.3 percent of Rinker as of Aug. 17, meaning it can potentially block the takeover.

``In any bid, you're always looking to get the maximum value you can,'' Gonzalez, who oversees about $17 billion in Australian stocks, said in a telephone call today. While the offer ``is at a premium from previous trade, it's still at a level off its highs. We have to wait and see.''

Other shareholders agreed.

The offer has ``a long way to go from here,'' said John Gethin-Jones, who manages about $41 billion at Queensland Investment Corp. in Brisbane. ``Normally you wouldn't make your highest bid first.''

Queensland Investment owns 11.7 million Rinker shares, according to Rinker's annual report.

Shares Slump

Cemex's move on Rinker continues a strategy that over the past 20 years has propelled the company to a global competitor from a small producer in northern Mexico. Buying Rinker would increase Cemex's annual revenue to more than $23 billion from $15 billion in 2005, and boost the number of employees to 67,000 in 50 countries from 52,600 now.

Cemex is the largest cement maker in the U.S. and the world's No. 3 after Jona, Switzerland-based Holcim Ltd. and France's Lafarge SA.

Shares of Rinker have slumped 31 percent from their April 26 high of A$21.44 on concern a housing slowdown in the U.S. will erode growth. To shield itself from a housing slump, the company has focused on Arizona, Florida and Nevada, which the census bureau forecasts will be the three fastest-growing states.

San Agustin today rejected suggestions that Cemex's bid was opportunistic, aimed at profiting from the recent share decline. Cemex had been looking at Rinker for more than four months as it's ``one of our best competitors,'' he said.

``We are not traders,'' he said. ``We buy companies because of the long-term value in the company.''

New York-based Citigroup Inc. and JPMorgan Chase & Co. are advising Cemex. Rinker appointed UBS AG to advise it on its defense.

``The board has been meeting over the weekend and will be meeting again on Monday,'' Debra Stirling, a spokeswoman for Rinker in Sydney, said today. ``We will make a statement after that.''

To contact the reporter on this story: Miriam Steffens in Sydney at msteffens1@bloomberg.net

Last Updated: October 29, 2006 03:20 EST