Alcan's Avoiding Alcoa

Alcan may be in search of a white knight. The Canadian aluminum producer has opened its books to mega-miners Rio Tinto and BHP Billiton in an attempt to fend off a $27 billion offer from American rival Alcoa, according to a report in The Sydney Morning Herald Wednesday.

Shares in BHP Billiton (nyse: BBL - news - people ) closed up 19 pence (38 cents), or 1.4%, at £13.84 ($27.57) Wednesday in London, while Rio ended the day 65 pence ($1.30), or 1.7%, lower at £38.38 ($76.54).

It would be no surprise for potential acquirers of Alcan (nyse: AL - news - people ) to have stepped in--not only would an Alcan-Alcoa union create the world's biggest aluminum producer, but if either BHP or Rio Tinto (nyse: RTP - news - people ) had considered buying Alcan before, now could be their last chance with the miner in play.

Shares in Alcoa (nyse: AA - news - people ) had spiked on Monday after a Times of London report that BHP was considering reviving a planned $40 billion bid for Alcoa. (See "BHP Rumored To Eye Alcoa, Alcan.") But prior to that, Billiton has reportedly entered early-stage discussions with Alcan, according to a May 23 report in Canada's Globe and Mail newspaper.

A BHP bid for Alcan makes sense because the aluminum operations of both companies would complement each other. Alcoa, for instance, has substantial downstream manufacturing operations, including an aluminum foil business.

But Gavin Wendt of market analyst Fat Prophets believes BHP wouldn't be able to extract the same kind of value from a takeover of Alcan that Alcoa could. "Any bid that BHP could mount, Alcoa could top, because there would be greater benefits flowing to them from a tie-up," he told The Associated Press.

Still, BHP Billiton will more than likely take part in the merger and acquisition activity gripping the metals sector. It named internal candidate Marius Kloppers, president of Billiton's non-ferrous materials group, as a successor to outgoing Chief Executive Chip Goodyear. Kloppers was behind Billiton's last major acquisition, the 2005 purchase of copper and uranium miner WMC Resources.

BHP and Rio Tinto have declined to comment on the Herald report about Alcan.

The mining sector was in focus on Wednesday after Credit Suisse downgraded its stance on metals and mining to 20% overweight.