NEW YORK - U.S. aluminium maker Alcoa is now itself vulnerable to takeover after Canadian rival Alcan rebuffed its $29 billion hostile bid in favour of a deal with Rio Tinto .

Alcoa shares reacted by hitting a new high along with those of Alcan, which announced the $38 billion deal with the Anglo-Australian mining company on Thursday.

Another Anglo-Australian miner, BHP Billiton , is one possible buyer for Alcoa, analysts and sources familiar with the matter said, and other names in the frame include CVRD and Xstrata .

Sources said BHP would only be interested in Alcoa's mining activities, not its packaging and downstream metal production businesses. Alcoa and BHP declined comment on the speculation.

Hours after the Alcan-Rio announcement, Alcoa said it was withdrawing its offer for Alcan, which was a subsidiary before Alcoa divested its foreign holdings in the early 20th century.

"It puts Alcoa strategy in question (and) makes them vulnerable to a BHP Billiton offer," Charles Stanley analyst Tom Gidley-Kitchin said of the Rio deal.

Alcoa's other possible move is looking for another acquisition that would fend off an unwanted suitor.

But one arbitrage trader said without Alcan, Alcoa was left hanging in the wind. "I don't know that Alcoa has any other options," he said, pointing out there were few aluminium makers left to buy given the consolidation of the metals industry.

Alcoa's withdrawn bid for Alcan, at $77.09 per share in cash and stock, was about $24 a share below Rio's.

"At this price level, we have more attractive options for delivering additional value to shareholders." Alcoa Chief Executive Officer Alain Belda said in a statement.

He said this could come from strong results, growth investments, trimming underperforming businesses and resuming a share buyback program suspended while the Alcan offer was open.

In January, its board authorized the repurchase of up to 10 percent of the outstanding stock, or about 87 million shares.

BID SPECULATION

Analysts said Rio's deal put Alcoa in focus for BHP, prompting Alcoa stock to leap and moves in the options market.

Alcoa shares hit a record high and closed on Thursday at $45.29, up 6.7 percent, on the New York Stock Exchange.

"The deal rips Alcan from the jaws of Alcoa in what had become a nasty spat. Traders are now focused on the likelihood of a bid from Australian mineral producer, BHP Billiton (BHP)," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group, in his daily commentary.

"It seems that all of those Alcoa bulls finally got this one right, yet some perhaps wise cautionary protection was taken on the put side this morning," he said.

Options investors often turn to puts in anticipation of share price weakness or to protect holdings from adverse price swings, and to calls hoping to profit from a share price rise.

According to market research firm Track Data, a total of 259,552 calls compared to 55,738 puts traded in Alcoa, way above its normal volume of 64,948 contracts overall.

Roughly 51,000 contracts combined traded in July and August $45 Alcoa calls. Speculation grew that Alcoa stock would keep rising with new trading in calls granting buyers the right to buy Alcoa shares at $50 between now and October, Wilkinson said. On the defensive side, there was heavy put trading at the $42.50 and $45 strikes in July and August contracts.

Talk that BHP is interested in Alcoa has surfaced in media reports since early this year, but analysts, traders and investors said there are other possible buyers as well.

Victory Capital Management analyst and portfolio manager Kirk Schmitt said possible suitors also included Xstrata and Brazil's CVRD -- which bid for Alcan but could not meet Rio's $101-per-share cash price, according to two sources.

Pittsburgh-based Alcoa may need to be on board for any takeover to be successful, however, given Pennsylvania takeover laws that enable companies to fend off unwanted attacks more easily.

Schmitt said given Rio's bid premium on Alcan, Alcoa would be worth about $55 per share. Management would need to agree, he said, but investors were likely to put pressure on them.

"Investors, including ourselves, have been sort of disappointed in Alcoa. In the last three or four years they haven't really taken part in the move in the metals sector," said Schmitt, whose firm owns Alcoa, BHP and Rio Tinto shares.