Alcan shares jump on talk of benign BHP bid

London - Shares of Alcan rose yesterday after Toronto's Globe and Mail reported that Canada's top aluminium producer was in talks with BHP Billiton to fend off a $27.4 billion (R192 billion) hostile takeover bid by Alcoa.

Alcan has been involved with the development of the $2.7 billion Coega aluminium smelter since it bought French group Pechiney in 2003.

This week, in the strongest indication yet that the proposed Coega smelter would be built, Alcan said it had selected a chief executive and advertised for a number of key posts at the project.

The engineering study for the smelter is set to be completed by the middle of next year, with construction to start late in the year. The first metal is on the cards for 2010.

Alcan said the Alcoa bid had no impact on the Coega project. Yesterday it urged shareholders to reject the bid, saying it was too low. Chief executive Richard Evans said the company was in talks with other potential suitors.

The Globe and Mail said Alcan had started "early-stage" talks with BHP Billiton, citing unidentified people.

Alcoa, which is losing market share to Chinese and Russian producers, proposed the takeover - the biggest in the metals industry - earlier this month.

Alcan shares rose 3.4 percent to $83.78 in early New York trade. They have jumped 37 percent since the May 7 bid, topping the cash and stock offer by Alcoa, which is currently valued at about $75. Alcoa rose 3 percent to $40.10.

Bank of America analyst Kuni Chen said: "We continue to believe Alcan is worth $80 to $90 on a takeout."

BHP spokesperson Emma Meade said the company did not comment on rumour and speculation. Stefano Bertolli, a spokesperson for Alcan's Australian unit, declined to comment.

US-based Alcoa made its bid for Alcan after two years of talks failed to lead to a so-called merger of equals.

BHP Billiton chief executive Charles Goodyear said yesterday that the company was always looking at potential acquisitions. "We can move very quickly, but we have to understand why."

The mining firm runs the Hillside and Bayside aluminium smelters in Richards Bay. Its shares added 1.6 percent to R169.70 on the JSE, while the general mining sector rose 1.78 percent.