Alcan shares rise as auction talk heats up

Shares of Alcan Inc. (AL.TO: Quote, Profile , Research) (AL.N: Quote, Profile , Research) rose almost 3 percent on Monday after reports that two big mining companies may enter the fray to try to beat Alcoa Inc.'s (AA.N: Quote, Profile , Research) $28.5 billion hostile offer for the Canadian aluminum maker.

The Sydney Morning Herald newspaper reported that Rio Tinto Ltd. Plc (RIO.AX: Quote, Profile , Research) (RIO.L: Quote, Profile , Research) had hired Deutsche Bank to advise it on a possible bid for Alcan.

Canada's Globe and Mail newspaper said Norway's Norsk Hydro ASA (NHY.OL: Quote, Profile , Research) also had begun work on a bid worth more than $30 billion.

Citing investment bankers, the Globe said Norsk Hydro, which is 43 percent state-owned, could tap into the Norwegian government's pension fund, which is valued at about $292 billion, to help fund a deal.

Alcan shares rose $2.60, or 2.8 percent, to C$94.25 ($87.26) on the Toronto Stock Exchange on Monday. The New York Stock Exchange was closed for the Memorial Day holiday.

Alcan's Toronto close was about 16 percent above Alcoa's cash-and-stock bid, which at the Friday close in New York, was $75.40 a share.

 Neither Rio nor Deutsche Bank would comment on the Sydney Morning Herald report.

Alcan declined to comment, except to repeat that it is looking at all options to increase shareholder value, including talking to third parties.

"Of course, these third parties, we will not disclose," said Alcan spokeswoman Anik Michaud.

Alcoa's bid was made on May 7, about six months after two years of merger talks with Alcan collapsed. The bid expires July 10, but the U.S. company expects to extend it.

Analysts say that would give other large international metals companies time to prepare rival bids, and for Alcan to come up with its own strategy.

Canadian politicians, meanwhile, are sounding alarm bells about foreign takeovers of the sort that have gobbled up Canadian corporate icons such as nickel miner Inco and steel maker Dofasco.

Canada's Liberals, which form the main opposition in Parliament, demanded on Monday that the minority Conservative government delay the approval of foreign takeovers for at least three months while reviewing foreign investment rules.

The left-leaning New Democratic Party and Quebec separatist Bloc Quebecois have also called for a review of rules.

 Conservative Industry Minister Maxime Bernier said the government would not make any quick changes to its foreign takeover rules in response to current bids for Canadian companies.

QUEBEC HAS KEY ROLE

The Canadian province of Quebec also has a key role in the battle for Alcan as the company enjoys a privileged relationship that gives it cheap electricity and access to waterways, where it produces its own hydro-electric power.

In return, Alcan has made commitments on keeping its head office in Montreal and investing to expand its Quebec operations.

Alcan is the world's third-largest maker of primary aluminum, behind Alcoa and Russia's United Company RUSAL.

An Alcoa-Alcan link-up, or an Alcan-Rio combination would top RUSAL.

Analysts said that if successful in winning Alcan, Rio was unlikely to retain the Canadian company's downstream aluminum rolling and packaging arms, which Rio could sell for more than $8 billion.

"With debt capacity of $15 billion or $20 billion, Rio's got the firepower to make a bid," said Shaw Stockbroking analyst John Colnan. 

 "It could get cheaper than it looks if Rio was to come in with a partner who would take the downstream and leave Rio with the mines and smelters," Colnan said.

BHP Billiton Ltd. Plc. (BHP.AX: Quote, Profile , Research) (BLT.L: Quote, Profile , Research), Companhia Vale do Rio Doce (VALE5.SA: Quote, Profile , Research), United Company Rusal, Anglo American (AA.L: Quote, Profile , Research) and Xstrata Plc. (XTA.L: Quote, Profi