Alcan rejects ‘inadequate’ Alcoa bid

Alcan rejects ‘inadequate’ Alcoa bid
By Bernard Simon in Toronto
Copyright The Financial Times Limited 2007
Published: May 22 2007 21:47 | Last updated: May 22 2007 23:39



Alcan, the Montreal-based aluminium producer, has produced a litany of objections to a $27.6bn hostile bid by Alcoa, its US rival.

Describing Alcoa’s offer as “inadequate in multiple respects”, Alcan said it did not offer an appropriate control premium, was highly conditional and uncertain. It also noted that the cash-and-shares offer, valued at $74.60 a share, was well below Alcan’s closing price on Tuesday of $81.03.

Alcan shares jumped more than 2 per cent to above $83 in after-hours trading following its announcement. Alcoa was little changed.

Hinting that it might be seeking a white knight, Alcan said “it is clear to us that Alcan and Alcoa have fundamentally different approaches and track records in creating shareholder value”. It added that “we are continuously evaluating all options”.

A merger between the two companies would create the world’s biggest aluminium producer, overtaking Russia’s Rusal, which acquired its smaller compatriot Sual in August in a $30bn deal.

Alcoa has said bringing the two companies together would realise annual savings of about $1bn, and that the combined group would generate substantial cash flow, allowing it to reduce debt while continuing to invest in new projects.

However, the bid is widely seen as a pre-emptive move by Alcoa to avoid becoming a takeover target itself. “They are both in play right now,” said Terry Ortslan, a Montreal mining analyst.

BHP Billiton and Rio Tinto have been mentioned as potential bidders for either company.

Dick Evans, the Canadian group’s chief executive, confirmed the two rivals had been in talks for two years but said “at no time was Alcan presented a compelling proposal that was in the best interests of our shareholders”.

He blamed Alcoa’s “consistent refusal to agree to standard and reasonable confidentiality and standstill agreements” for bringing the talks to an end last autumn.

Alcan disclosed in a regulatory filing that Alain Belda, Alcoa’s chief executive, warned Mr Evans in October that the US group’s “fall-back plan was ‘to go hostile’ ”.

Alcoa said it was studying Alcan’s statement. It has spent much of the past two weeks seeking to allay political concerns in Canada, and especially Quebec, about the consequences of a takeover of one of the country’s leading corporate names.