Aluminum producer Alcan Inc. (AL) has begun negotiating toward a merger agreement with Rio Tinto Plc (RTP) to fend off a hostile bid from U.S. rival Alcoa Inc. (AA), a Canadian newspaper said Wednesday.

The Globe and Mail, citing sources, said global mining company Rio Tinto hired investment banker CIBC World Markets recently to help it prepare a bid for Alcan.

Britain's Times newspaper also reported that Rio was poised to launch a $34 billion takeover of Alcan, saying that Wall Street investment bankers believe the rival offer "is ready to go hot" with a formal approach within two weeks.

An Alcan spokeswoman could not immediately be reached for comment. A Rio spokesman in London had no comment.

Alcan said last week that the $28.6 billion hostile offer from Alcoa remains inadequate and it is pursuing alternatives such as talks with other groups.

However, Alcoa said Monday it extended its $28.6 billion offer for Alcan by a month.

($1-$1.06 Canadian)