Alcan snubs Alcoa bid as paltry

Canadian giant Alcan on Tuesday snubbed US rival Alcoa's bid to create the world's biggest aluminum company, calling the former parent's $33bn hostile bid for Alcan paltry.

Alcan's board "unanimously recommends shareholders reject Alcoa Inc's unsolicited offer to acquire Alcan," said a company statement.

"It does not adequately reflect the value of Alcan's extremely attractive assets, strategic capabilities and growth prospects; does not offer an appropriate premium for control of Alcan; and is highly conditional and uncertain," Alcan chairperson Yves Fortier said.

The firms "have fundamentally different approaches and track records in creating shareholder value," he said.

Alcoa, the world's second-largest aluminum company, had offered US$73.25 per share for Alcan on May 7. The offer comprised 80% cash and 20% stock.

Alcoa said a tie-up would forge a "top five" global metals firm with $54bn in revenues, 190 000 employees and a big global footprint with operations in Europe, North America, Asia, Australia and elsewhere.

Alain Belda, chairperson and chief executive of Alcoa, in a conference call after unveiling the bid, said Alcoa and Alcan were "two companies that belong together" for "a stronger future for both".

He said in a letter to Alcan president Dick Evans that the merger could generate $1bn in cost savings while providing more cash for research and development.

Evans responded on Tuesday: "We do not feel the need to merge with anyone."

In an interview with AFP, Evans said Alcan already has the "scale, leading technology, well demonstrated track record and execution" to be a global leader.

Alcan has "strong projected cash flow" and "an exceptionally attractive pipeline of growth opportunities," he said. "So we do not feel an urgent need" to be assimilated to grow.

Founded in 1902 as the Canadian unit of Alcoa, Alcan was spun off in 1928 amid US anti-trust concerns.

Alcoa, which operates in 44 countries, said its offer for Alcan was made after nearly two years of private talks on reuniting, which ultimagely failed.

Evans said Alcan is involved in "ongoing discussions with other third parties" and might consider a combination, if it created "value for shareholders and went beyond what we felt was available for an internal strategy."

But not at the price offered by Alcoa, he said.

When asked if Alcan might bid on Alcoa, he replied: "Our board has asked us to consider all alternatives."

Following Alcoa's May 7 bid, Alcan shares surged 35% to close at $82.11, suggesting a possible bidding war amid a global boom in commodities and surging demand for aluminum and related products, particularly in Asia.

Speculation bristled since February that Alcoa was being targeted for a takeover, possibly by Anglo-Australian miners BHP Billiton and Rio Tinto, and that either of these might now turn their attention to Alcan.

Alcan, operating in 61 countries, acquired French aluminum maker Pechiney in late 2004, creating at the time the biggest packaging and the second-biggest aluminum group in the world, behind Alcoa.

Alcoa's number-one spot meanwhile was eclipsed by a merger in March of Russian aluminum producers Rusal and Sual with Switzerland's Glencore.

An Alcan-Alcoa merger would face US, Canadian, EU, Australian and Brazilian anti-trust authorities, as well as foreign investment clearance in Canada, France and Australia.

On Tuesday, Alcan stock closed at $81.03 in New York, down 0.07%, but still near its 52-week high of $82.60 and more than double its low in September 2006. Alcoa shares meanwhile closed at $38.95, down 1%.
Source : http://www.fin24.co.za/