Alcoa's troubled bid to be king

LONDON (CNNMoney.com) -- Alcoa's bid to reclaim the title of the world's largest aluminum producer could hit some snags if competitors set their sights on rival Canadian firm Alcan or on Alcoa itself, industry analysts said Tuesday.

Alcoa (Charts, Fortune 500) made waves last month when it made a $28.7 billion hostile takeover bid for smaller rival Alcan (Charts). Alcan has said Alcoa's offer is too low and doesn't adequately reflect the company's value. If the bid is successful, though, a deal would vault Alcoa back to the top spot in the aluminum business.

Alcoa lost that spot in March after two Russian firms and the aluminum business of a Swiss company merged, creating Russian aluminum-giant United Company Rusal.

But competing bids could derail Alcoa's plans. Reuters reported Tuesday that Australian mining firm BHP Billiton (Charts) is considering a bid for the Montreal-based Alcan.

Alcan is a leader in smelting technology, which gives it a big industry advantage and makes it an attractive target, according to Charles Kernot, mining analyst at investment bank Seymour Pierce in London.

Alcan also has access to long-term, low-cost electricity from hydro stations in Canada. That's key because electricity is a significant cost in making aluminum, Kernot said.

"If Alcoa were to win Alcan, then others would miss out. I'm sure other mining companies would be interested in taking a look [at Alcan]," he said.

Other miners that analysts named as potential bidders included Brazil's CVRD and British mining giant Anglo American.

Mining companies, awash with cash from the commodities boom, have been on the hunt for acquisitions in the growing aluminum sector.

In the United States alone, the aluminum industry produces about $39 billion in products and exports each year, according to the Aluminum Association, a trade group.

The pursuit has grown so intense that even Dow component Alcoa, which has a market capitalization of $36 billion, could be a takeover target.

The Times of London reported Monday that BHP was reviving its quest for Alcoa. In February, the market buzzed with speculation that BHP and Rio Tinto (Charts) were both circling Alcoa.

A BHP spokesman in London said the company does not comment on rumors or speculation.

Still, rampant takeover chatter has sent stock prices of potential targets soaring. That's one of the reasons why ABN Amro analyst Robert Clifford is skeptical BHP will buy either Alcoa or Alcan.

"[BHP] has teams looking at acquisitions globally and you've got to wonder what is it that's changed over the last 12 months that would make them want to pay more now," he said.

Shares of Alcoa have jumped about 47 percent in the last year while Alcan's stock has about doubled.

Clifford thinks BHP's acquisition strategy may be more piecemeal. "With them it's more likely to be a land grab. You could see them purchase numerous companies in prospective regions," he said.