TORONTO (AP) - Canadian aluminum producer Alcan has begun negotiating with Rio Tinto on a deal that could fend off a hostile takeover bid by U.S. rival Alcoa, a Canadian newspaper reported Wednesday.
Alcan Inc. has been the subject of speculation since Pittsburgh-based Alcoa Inc. made an unsolicited takeover offer in early May, following two years of discussions between the companies on a combination that would create the world's No. 1 aluminum producer.
The Globe and Mail newspaper quoted unnamed sources as saying Anglo-Australian mining company Rio Tinto PLC hired investment bank CIBC World Markets over the weekend to help it prepare a potential transaction with Alcan.
Alcan spokesman Bryan Tucker said the company does not comment on market speculation. He said the company is negotiating with multiple parties.
Montreal-based Alcan said in a filing with the U.S. Securities and Exchange Commission that it has signed a confidentiality and standstill agreement with a bidder other than Alcoa.
In a July 9 filing with the SEC, Alcan said it is ''continuing to have discussions and has undertaken negotiations concerning potential strategic transactions and alternatives to the Alcoa offer.''
Alcan's board roundly rejected Alcoa's offer in May, calling it inadequate. Alcan has said it would consider a higher bid or perhaps turn the tables on Alcoa and try to buy it.
U.S. antitrust authorities have sought more information about Alcoa's takeover effort, which was announced after two years of private talks failed to yield a negotiated deal. Alcan said Alcoa has underestimated the regulatory hurdles associated with the proposed combination.
Alcan has a big presence in French-speaking province of Quebec and approval in Canada could be difficult because of nationalist sentiment there.
Alcoa and Alcan were the world's top two aluminum producers until March, when Alcoa was eclipsed as the top producer by the Moscow-based United Company Rusal, which was formed through a three-way combination between Rusal, its rival Sual and the aluminum assets of Swiss-based commodities trader Glencore.
Rio Tinto already has a major bauxite operation in Australia, as does Alcan, which would give the combined company a powerful hold over one of the key materials in aluminum production.
The diversified miner is currently the world's eighth-largest aluminum maker, producing roughly 902,000 tons of aluminum products each year.
Aluminum is widely used in products like door and window frames, television components, drink cans, cooking utensils, aviation and leisure goods like tennis rackets and baseball bats.
Rio Tinto shares rose about 3.1 percent, up $9.77 to $325.31. Alcan shares gained $1.71, or almost 2 percent, to $87.85, while Alcoa shares rose 65 cents to $42.31.
