BHP Billiton, Rio may enter bidding war for Alcan

Alcoa Inc, the world's largest aluminium producer, may face competition in its US$26.9 billion bid for rival Alcan Inc from mining companies, including BHP Billiton Ltd and Rio Tinto Group, said Credit Suisse Group.

Alcoa could also become a target, said Credit Suisse analysts led by New York-based David Gagliano in a May 7 report.

Potential bidders include Anglo American plc, Cia Vale do Rio Doce (CVRD), OAO Norilsk Nickel and Teck Cominco Ltd, they said.

A five-year rally in metal prices has sparked 473 deals or bids in the industry this year, valued at US$55.4 billion, according to data compiled by Bloomberg.

Shares of New York-based Alcoa and Alcan surged on Monday, with Alcan rising past the bid price.

Alcoa's offer values Alcan's shares at US$73.25, or 20% more than the closing price on May 4.

Shares of Montreal-based Alcan surged 35% to US$82.11 in New York, a record daily gain.

Alcoa rose 8.3% to US$38.63, the company's biggest one-day gain since November 22. Alcoa's shares are worth between US$40 and US$50, and Alcan's shares are worth between US$70 and US$90, Credit Suisse said.

"We believe there is a very good possibility that other bidders will emerge for either Alcan or Alcoa," said the Credit Suisse analysts.

"With what will likely be an extensive antitrust review period, other interested parties will have plenty of time to do their work on both companies." Alcoa and Alcan's alumina and aluminium businesses would be attractive to mining companies, while their packaging and rolling units would lure non-mining companies, Credit Suisse's analysts said.

An Alcoa-Alcan combination would control about 25% of the alumina and aluminium markets, the analysts said.

The Times of London said February 13 that BHP Billiton and Rio Tinto may be planning bids for Alcoa. Of the other likely rival candidates, London-based Anglo American is the world's second-largest miner, and Brazil's CVRD is the world's largest iron ore exporter. Vancouver-based Teck Cominco, the world's second-largest producer of zinc, last year failed in its bid for rival Inco Ltd.

Shares of Melbourne-based Alumina Ltd, Alcoa's partner in the world's biggest alumina producer, surged as much as 41 cents, or 5.6% to A$7.74 on the Australian Stock Exchange and traded at A$7.68 at 10:18 am Sydney time.

A successful Alcoa bid for Alcan could "deliver significant benefits," to the Alcoa World Alumina & Chemicals joint venture, Alumina's chief financial officer Ken Dean said on Tuesday in a statement posted on the Australian Securities Exchange.

The venture is the "exclusive vehicle" for any bauxite and alumina businesses of Alcoa and Alumina, and Alcan has stakes in a number of bauxite and alumina assets, Dean said. Alumina owns 40% of the venture, and Alcoa the rest.