Alcan Inc.''s board of directors unanimously rejected a $27.5- billion hostile bid from Alcoa Inc dismissing the offer as inadequate, and said it is currently engaged in talks with other potential suitors.

Dick Evans, chief executive said the Montreal-based aluminum giant Alcan, is involved in "on-going discussions with other third-parties" but declined to comment further.

Reports quoting sources said Alcan has signed confidentiality agreements with at least two potential suitors who "are actively looking" at the company. The rumoured bidders for Alcan include BHP Billiton PLC, Rio Tinto PLC, and Companhia Vale do Rio Doce of Brazil.

Alcan''s board asked shareholders to reject Alcoa''s May 7 bid as it fell short of the company''s value and was not in the best interests of investors, chairman Yves Fortier said in a statement.

"It does not adequately reflect the value of Alcan''s extremely attractive assets, strategic capabilities and growth prospects, does not offer an appropriate premium for control of Alcan, and is highly conditional and uncertain," he said.

The companies, Fortier said, have "fundamentally different approaches and track records in creating shareholder value."

Alcoa said it was reviewing Alcan''s lengthy response, which was filed with the Securities and Exchange Commission.

"We continue to believe that our offer is full, fair and provides attractive value to Alcan shareholders," Alcoa spokesman Kevin Lowery said.

Alcan said the offer represents a discount to the trading price of Alcan shares, with a total value that will vary with the price of Alcoa shares.

The bid includes $58.60 a share in cash and 0.4108 of an Alcoa share for each share of Alcan.

At Alcoa''s closing price of $38.95 on Tuesday, the bid stands at $74.60 per share, below Alcan''s closing price of $81.03. Alcan shares gained 3.1 per cent to $83.50 in after-hours trading, while Alcoa shares rose 1.8 per cent to $39.64 after hours.

Besides rejecting Alcoa''s bid as too low, Alcan''s board dismissed the unsolicited offer, saying it was considered "highly conditional" and "subject to significant risks and uncertainties, both as to timing and ultimate outcome."

Alcoa launched its cash and stock bid for Montreal-based Alcan after almost two years of private talks failed to produce a negotiated agreement.

But the key stumbling block to a deal was the price. In a regulatory document filed with the U.S. Securities and Exchange Commission yesterday, Alcan also cited strong aluminum industry fundamentals and the company''s own growth prospects as reasons why Alcoa''s offer was considered not rich enough for shareholders.