Canadian aluminum producer Alcan Inc., fending off a hostile US$27 billion takeover bid by United States (U.S.) competitor Alcoa Inc., has entered into talks with Australian mining giant BHP Billiton Limited, a newspaper reported.

Analysts say such negotiations could be under way, and that other suitors may be waiting in the wings as Alcan seeks a richer offer for its shareholders.

Shares of BHP Billiton Limited, the world's largest miner, declined 1.2 per cent a day after a report in Canada's Globe and Mail newspaper said the company had entered talks with Canadian aluminum producer Alcan Inc.

BHP Billiton said yesterday it had no comment on the report, which cited unnamed sources.

"We don't comment on rumour or speculation," BHP Billiton spokes-woman Emma Meade said in Melbourne, Australia.

Alcan rejected Alcoa's offer as inadequate on Tuesday, saying in a filing with the Securities and Exchange Commission that it was exploring alternatives, partly through discussions with third parties.

Canada's Globe and Mail, citing unidentified people familiar with the matter, reported on Wednesday that Montreal-based Alcan was in talks with BHP Billiton, the world's biggest resource company.

In addition to BHP Billiton and Rio Tinto, Alcan may have a third potential buyer - Brazil's Companhia Vale do Rio Doce SA, the world's second-largest mining company, according to analyst Charles Bradford of Bradford Research/Soliel Securities.

"These are the guys that are big enough to buy an Alcan," he said.

Alcoa's revenue for the first quarter of the year was US$7.9 billion (€5.86 billion), while Alcan's was US$6.4 billion (€4.74 billion).

In a research note, Friedman, Billings, Ramsey analyst Amir Arif wrote: "We believe that either (Alcoa) will raise its offer price or a new bid will emerge, which will benefit (Alcan) shareholders either way."

Alcoa reaffirmed its current proposal late Wednesday, saying it was "the most logical partner for Alcan."

"We have studied Alcan's response and have not seen anything that would lead us to reevaluate our offer," Alain J.P. Belda, Alcoa's chairman and chief executive, said in a statement.

Strong support

"We have already met with a significant number of Alcan's shareholders and are pleased to have received strong support for the combination."

Alcoa founded Alcan in 1902 and split it off as a separate company in 1928. They retained largely common ownership until 1951, when major shareholdings were divested by U.S. court order for antitrust reasons.

The recombined company would have 188,000 employees in 67 countries, alumina capacity of about 21.5 million metric tonnes, and aluminum capacity of approximately 7.8 million metric tonnes, according to Alcoa. Alumina is used to make aluminum.

- AP