Alcan moves toward friendly deal: sources

NEW YORK (Reuters) - Alcan Inc AL.TOAL.N, which is fending off a hostile $28.8 billion bid from U.S. rival Alcoa Inc (AA.N), is closer to arranging a rival friendly deal and is expected to make an announcement this week, according to sources familiar with the situation.

Among the two companies sources said are interested in Alcan are mining behemoths Rio Tinto Plc (RIO.L)(RIO.AX) and BHP Billiton (BHP.AX)(BLT.L).

But BHP Billiton may not be as far along in the negotiating process as Rio, the sources said, indicating Rio could be closer to an offer.

The sources said an announcement is expected before the end of the week.

Britain's Times newspaper said on Wednesday that Rio was poised to offer $90 a share, or $34 billion.

Among other companies sources previously said have shown interest in Alcan are Brazil's CVRD (VALE5.SA).

Alcan, which has long said it was in talks with third parties as part of efforts to fight off Alcoa, switched gears slightly this week in describing those negotiations.

It now says it has signed confidentiality and standstill agreements with those parties, indicating the company has moved further along in the negotiating process.

But Alcan declined to name the third parties, or say who it was talking to.

"We're in negotiations with third parties," said spokeswoman Anik Michaud.

A Rio spokesman in London had no comment.

The company has at least two investment banks -- Deutsche Bank AG (DBKGn.DE) and Credit Suisse Group (CSGN.VX) -- working for it, sources have said. According to Canada's Globe and Mail newspaper, it recently hired CIBC World Markets as well. CIBC (CM.TO) said it had no comment.

BHP, which has hired Merrill Lynch and Co Inc MER.N according to sources, also declined to comment.

One issue that any rival bid must consider is that, under its agreements on power supply and waterways rights with Quebec province, Alcan must keep its head office in Montreal.

Alcan shares rose $1.71 cents to $87.85 on the New York Stock Exchange and rose C$2.55 to C$92.75 on the Toronto Stock Exchange in early afternoon trading. Alcoa shares rose 54 cents to $42.21 in New York.

Alcan has repeatedly rejected Alcoa's May 7 offer as inadequate.

Based on Alcoa's most recent share price on the New York Stock Exchange, its offer valued Alcan at $75.94 a share.

Alcan has declined to enter talks with Alcoa, in part because it says Alcoa refused to sign a confidentiality and standstill agreement during friendly talks that collapsed last year.

Alcoa this week extended its offer for Alcan to August 10. It also signed a $30 billion line of credit from Goldman Sachs Group Inc (GS.N) and Citigroup Inc (C.N), which are advising it on the offer.

(Reporting by Caroline Humer and Nick Zieminski in New York; Robert Melnbardis and Scott Anderson in Toronto and Eleanor Wason in London)