Alcan Says Alcoa Bid Lacking, Mulls Options

Alcan, the big Canadian aluminum maker, said Friday that a $28.6-billion hostile takeover offer from Alcoa remains inadequate, and that it is pursuing alternatives such as talks with other groups.

Alcan spokeswoman Anik Michaud declined to comment on reports that Rio Tinto , the world's second-largest miner, has asked investment banks to advise it on options, including a possible counterbid for Alcan.

"We've said that from the outset that we were in discussion with third parties," Michaud said. She declined to identify the third parties.

Earlier Friday, Alcoa said U.S. Department of Justice antitrust investigators had asked it for additional information regarding its May 7 offer for Alcan. Alcoa said it had a detailed road map to resolve competition issues. Alcan's Michaud said she expects Alcoa to extend the July 10 deadline on its offer.

"We contend that from the beginning, Alcoa has underestimated the substantive impediments to achieving the regulatory clearances," Michaud said. She added that Montreal-based Alcan is not bound by any timing considerations at this point on unveiling its strategy to counter the Alcoa offer.

Alcan shares were up .

Alcoa said it had a detailed road map to resolve competition issues through targeted divestitures and was looking to obtain approval in each jurisdiction and complete the takeover by the end of this year.

"We continue to believe that a combination of Alcoa and Alcan makes strong strategic sense," Alcoa Chief Executive Alain Belda said.

Alcan is the world's third-largest maker of primary aluminum, behind Alcoa and Russia's UC RUSAL. An Alcoa-Alcan link-up, or an Alcan-Rio combination would top RUSAL.

If Rio buys Alcan, it would have access to two of the world's largest sources of bauxite -- Rio's existing Weipa deposit and Alcan's Gove deposit, both in Australia. Bauxite is required to make alumina, then aluminum, for use in products ranging from drinks cans to airplanes.

Earlier this week, Rio announced plans to invest $1.8 billion in expanding its alumina refining operations, which some analysts interpreted as a sign it would not bid for Alcan.

Alcoa made its bid on May 7, about six months after the collapse of two years of merger talks with Alcan. The offer is $58.60 in cash and 0.4108 Alcoa shares for each Alcan share.

BHP Billiton , Norsk Hydro , Companhia Vale do Rio Doce , RUSAL, Anglo American and Xstrata are also viewed by analysts as potential bidders for Alcan.

Alcan, which split off from Alcoa in the 1920s because of antitrust concerns, is expected to unveil its own strategy in the coming weeks, which will indicate whether it wants to remain independent, find another suitor or reach a friendly deal with Alcoa.