The world's largest mining group, BHP Billiton, is considering a rival bid for aluminium producer Alcan and has hired an investment bank, sources familiar with the matter said.
The emergence of BHP as a possible white knight in the face of Alcoa Inc's $US28.7 billion ($NZ38.6 billion) hostile offer for Alcan came as Alcoa's stock hit a six-year high on a report that the US aluminium company, and not its Canadian rival Alcan, was a target of BHP. Alcoa stock eased to close less than 1 per cent higher.
The sources said that BHP, which trades in Australia and London, has hired Merrill Lynch & Co to explore the possibility of buying Alcan, but stressed that such a move is not definite.
BHP, which has an office in Houston, was not immediately available for comment. Montreal-based Alcan and Merrill Lynch declined to comment.
BHP is one of a handful of mining companies, along with Rio Tinto, Anglo American, Brazil's CVRD and Russia's Rusal, that several other sources familiar with the matter have said might be interested in bidding for Alcan, which has rejected Alcoa's approach.
Monday's edition of the Times of London said BHP Billiton was targeting Alcoa, rather than Alcan, and had revived plans for a $US40 billion takeover of the Pittsburgh-based company. It was the second Times story in four months saying BHP was looking at Alcoa.
The unsourced newspaper report comes prior to Marius Kloppers taking over as BHP's chief executive in October, when Chip Goodyear retires. It was Goodyear who sidelined the initial Alcoa plan, preferring to return cash to shareholders, The Times said.
Most analysts saw such a scenario as unlikely and said even if there were some truth to the speculation, it would be a thorny deal fraught with operational and regulatory problems.
"This is the same rumour that's been around for six months," said analyst Charles Bradford of Bradford Research/Soleil. "The current story makes very little sense."
In an unsourced report in February, The Times said BHP and Rio Tinto were both considering bids for Alcoa.
Most analysts agreed that anyone eyeing Alcoa would most certainly only be interested in its upstream, or mining and smelting, operations, rather than downstream businesses, which manufacture products such as kitchen foil.
Indeed, Alcan, which does not have the same type of downstream business as Alcoa, may be a more interesting takeover target for large mining companies looking to increase aluminium operations, sources said at the time.
Alcan argues that Alcoa's bid does not reflect the value of the company's assets, technology and growth prospects.
Alcoa's stock rose nearly 3 per cent on the New York Stock Exchange in Monday morning trading to reach $US42.80, its highest since June 2001. But it eased later and closed up 28 cents, or 0.7 per cent, at $US41.88.
In Chicago, there was "hectic" options trading on Alcoa, because of the Times report of BHP interest, said Andrew Wilkinson, senior market analyst at Interactive Brokers Group. More than two calls traded for each put as investors jockeyed for position should Australia-based BHP decide to follow through with an actual bid, he said.
He said the most active options were the calls allowing investors the right to buy Alcoa shares at $US50 a piece by mid-July. Those calls traded on volume of more than 6247 contracts in afternoon trading and cost 25 cents a contract, down 10 cents on the day.