May 23 -- Shares of Alcan Inc., Canada's biggest aluminum producer, rose after the Globe and Mail reported the company was in talks with BHP Billiton Ltd. to fend off a $27.4 billion hostile takeover bid from Alcoa Inc.
Alcan yesterday urged shareholders to reject the bid and Chief Executive Officer Richard Evans said the Montreal-based company was in talks with other potential suitors. Alcan has started ``early stage'' talks with BHP, the Globe and Mail said on its Web site, citing unidentified people.
Alcoa proposed this month the biggest metals-industry takeover as it loses market share to Chinese and Russian producers. BHP, the world's largest mining company, and Brazil's Cia. Vale do Rio Doce may emerge as bidders, Credit Suisse Group said May 7. Alcan said yesterday that Alcoa's bid is too low.
``BHP and Vale are the most likely counter-bidders,'' Tony Robson, a Sydney-based analyst at Global Mining Research, said in a phone interview. ``Alcan is a good sizeable addition to BHP's business.''
Alcan rose $4.86, or 6 percent, to $85.89 in New York Stock Exchange composite trading. The shares have jumped 41 percent since the May 7 bid, topping the cash and stock offer from New York-based Alcoa, which is currently valued at $75.18. Alcoa rose $1.42, or 3.7 percent, to $40.37 in New York.
BHP's Interest
BHP Chief Executive Charles Goodyear said he wouldn't rule out acquiring any company, including the world's second-largest mining company, London-based Rio Tinto Plc.
``We do look at everything to determine does it make sense for BHP Billiton, whether that is a Rio Tinto or anybody else out there,'' Goodyear said today at a business group breakfast in Perth, Australia. ``We can move very quickly, but we have to understand why we are doing it. We don't have to do it for size.'' He declined to comment on BHP's plans.
``We continue to believe Alcan is worth $80 to $90 on a takeout,'' Bank of America analyst Kuni Chen said today in a note to investors. He has an $86 price target for Alcan.
``We are in discussions with third parties,'' Alcan's Evans said in an interview yesterday. ``We prefer an offensive strategy to a defensive strategy and are seeking alternatives that create shareholder value.''
Alcoa's proposal doesn't ``offer an appropriate premium for control,'' Alcan Chairman Yves Fortier said yesterday in a filing.
Failed Talks
Alcoa made its bid for Alcan after two years of talks failed to lead to a so-called merger of equals. Alcoa sought the deal to compete more effectively with Chinese producers and Russia's United Co. Rusal, which completed a three-way merger in March to become the world's biggest producer.
``Alcoa is going to have to come back with a higher bid,'' said Scott Burns, an analyst at MorningStar Inc. in Chicago. ``It still has some dry powder in terms of the synergies to increase the offer.''
BHP doesn't comment on rumor and speculation, said Emma Meade, a spokeswoman for the Melbourne-based company. Stefano Bertolli, a spokesman for Alcan's Australian unit, declined to comment on the report.
Some Canadian politicians question whether a takeover of Alcan is in the national interest, citing $156 billion of announced foreign acquisitions of Canadian companies in the past 18 months.
Canadian Opposition
In a speech today, New Democratic Party Leader Jack Layton called on Prime Minister Stephen Harper to block any foreign takeover unless the buyer agrees to move their headquarters to Canada.
``If these conditions are not respected, the government must use its powers to block such transactions,'' Layton said, according to a transcript of the speech given in Quebec.
Alcoa, as part of an attempt to win Canadian approval for its bid, has offered to create dual headquarters in New York and Montreal and to move its key primary metals business to the Canadian city. It's also proposing to appoint Canadians to its board and to proceed with $6.8
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