Aluminum producer Alcoa Inc. has withdrawn a $28 billion hostile takeover bid for Canadian competitor Alcan Inc. after mining giant Rio Tinto entered a significantly higher bid.

The Pittsburgh-based company relinquished its offer less than a day after Rio Tinto and Alcan jointly announced the competing $38.1 billion cash bid that would create the world's largest aluminum company.

Alain Belda, Alcoa's chairman and chief executive, said the Anglo-Australian miner's offer "strongly reinforces our view of the underlying value in the aluminum industry and its bright prospects for the future."

"However, at this price level, we have more attractive options for delivering additional value to shareholders," he said in a statement.

Rio Tinto's bid is 65.5 percent higher than Alcan's closing share price before Alcoa's May 4 takeover bid, and nearly 33 percent higher than Alcoa's offer, according to Rio Tinto and Alcan.

Alcoa and Alcan were the world's top two aluminum makers until March, when the Moscow-based United Company Rusal surpassed Alcoa as the leading producer after being formed through a three-way merger.

Belda said Alcoa will continue to "make targeted growth investments, trim underperforming businesses and further enhance returns to shareholders by resuming our share-repurchase program," which was suspended amid the Alcan offer.

"That is a better path forward for our shareholders, our employees and our communities," he said.

Alcoa approached Alcan shareholders with its bid in early May, after nearly two years of private talks failed to produce a negotiated agreement. Alcan repeatedly dismissed the offer as inadequate and fraught with regulatory and other risks.

Alcoa's proposal faced review by antitrust authorities in Canada, the European Union, Australia and Brazil, as well as foreign investment clearance in Canada, France and Australia. U.S. antitrust authorities last week issued a second request for information about the offer.

To satisfy regulators, Alcoa would likely have to divest from certain aerospace and alumina operations, analysts said. Alumina is used to make aluminum. Alcoa and Alcan are the two biggest producers of heat-treated aerospace plate.

Earlier Thursday, Alcan Chief Executive Dick Evans said there had been multiple parties interested in the company, but that Rio's offer provided the best shareholder value and strategic rationale.

"Rio Tinto was the best fit with Alcan _ there are complementary bauxite and aluminum businesses, strong technology and people synergies, a good geographical footprint and not a lot of baggage," he said in a Web site broadcast.

Alcoa, on the other hand, had a "lot of baggage," he said, noting regional and process risks. "We chose Rio."

Analysts said Alcoa's withdrawal could make the company a more handsome buyout prospect.

"We think that it is plausible that one of the other global miners, such as BHP Billiton or Companhia Vale do Rio Doce, now makes a bid for Alcoa," Lloyd T. O'Carroll, a Davenport & Co. analyst, wrote in a client note.

Charles Bradford of Bradford Research/Soliel Securities said only one mining company was capable of buying Alcoa: Australia's BHP Billiton Ltd.

He said lenders may be more willing to put up cash for the purchase of Alcoa as its valuation is lower than that of Alcan.

"BHP will now go for Alcoa," Numis Securities analyst John Meyer told Dow Jones Newswires. "Rio and BHP are doing what venture capitalists would otherwise have moved to do."

Leo Larkin, an equity research analyst with Standard & Poor's, said he was not surprised Alcoa withdrew its bid as "it's just not as financially powerful a company as Rio Tinto."

Larkin also said Alcoa may have become more appealing as a takeover target for a company such as BHP Billiton now that it is not poised to buy.

"I think a lot of people are assuming Alcoa can't remain a standalone company," Larkin said. "I don't necessarily agree with that premise."

An Alcoa spokesman declined to comment on the possibility of an Alcoa takeover.