Alcan Inc., a Canadian aluminum producer, urged shareholders to reject a $27.4 billion bid from competitor Alcoa Inc. as “inadequate” and said the board of directors has been in talks with other potential suitors.

The $74.60-a-share offer “does not adequately reflect the value” for Montreal-based Alcan and “does not offer an appropriate premium for control,” the chairman, Yves Fortier, said yesterday in a filing. “Alcan and Alcoa have fundamentally different approaches and track records in creating shareholder value.”

Alcoa wants to create the world’s largest aluminum company, head off competition from Chinese producers and avoid becoming a takeover target for mining companies including BHP Billiton Ltd. and Rio Tinto Plc. Shares of Alcan have jumped 33% since the May bid, topping the offer from New York-based Alcoa.

“To get this done, Alcoa is going to need to sweeten its bid,” a metals analyst at Standard & Poor’s in New York, Leo Larkin, said in an interview before yesterday’s announcement. “Alcoa is going to do whatever it takes to get this deal done.”

Shares of Alcan rose to $82.85 at 4:59 p.m. in New York, up 2.2% from the yesterday ‘s close of $81.03. The May 7 proposal called for exchanging each Alcan share for $58.60 in cash and 0.4108 of an Alcoa share.

Alcoa rose to $39.88 in afterhours trading, up from yesterday’s close of $38.95.