Alcan said to be in negotiations with Rio Tinto

Canadian aluminum producer Alcan, Inc., which recently said it entered strategic negotiations with other parties as it fends off an unwanted bid from U.S. rival Alcoa, Inc., is negotiating one such deal with British mining concern Rio Tinto, the Globe and Mail newspaper reported Wednesday. In a report citing unnamed sources, the Globe said London-based Rio Tinto hired investment bank CIBC World Markets over the weekend to help it prepare a potential transaction with Montreal-based Alcan. A spokesman for Rio Tinto declined to comment on the report. On Wednesday, U.S.-listed shares in Alcan closed up 4% to $89.60 after touching a fresh all-time high of $90.44, or more than $17 higher than Alcoa's per-share offer price. Rio Tinto's U.S. shares gained 2.8% to $324.42. Shares in Alcoa, also the subject of rumors that a large international mining company will buy it, gained 1.9% to $42.43. In the course of rejecting Alcoa's unsolicited $27 billion offer, launched in May, Alcan's management has said it is talking to other parties about alternatives -- and has not ruled out its own offer for hopeful suitor Alcoa. Analysts have named BHP Billiton, Xstrata Plc, Anglo-American Plc, Rio Tinto and Companhia Vale do Rio Doce as possible takeover candidates for Alcan. None has come forward with a public bid. Still, Alcan's discussions with potential merger partners seem to have taken a serious turn recently. On July 9, it disclosed it has taken a step beyond talks with other parties by undertaking "negotiations concerning potential strategic transactions and alternatives to the Alcoa offer." "Alcan as to its July 9 filing confirmed that we are negotiating with multiple third parties, an elevation from discussions," Alcan spokesman Bryan Tucker said Wednesday. He said the company has entered confidentiality and standstill agreements with some parties. Alcan previously disclosed it hired Morgan Stanley, UBS, JPMorgan and RBC Capital Markets as investment bank advisors on Alcoa's offer and alternatives. Rio Tinto, the world's fourth-biggest producer of copper and third-largest producer of nuclear-energy feedstock uranium, has shown clear interest in aluminum. Last week it made plans to increase its aluminum smelting capacity with a $1.8 billion expansion of its Yarwun Alumina Refinery in Australia. Rio Tinto also mines for bauxite, the precursor to alumina, in Australia. At the time, Rio Tinto CEO Tom Albanese said "the attractive fundamentals of the aluminium industry," plus Yarwun's low costs, location and the company's bauxite resources in northern Queensland, Australia, "reinforce the deep underlying strength of the group's organic growth pipeline." Last year, profits from aluminum made up 10% of Rio Tinto's earnings.