<Bt-4z55>Alcoa makes $27b move for Alcan
TORONTO (AP) — Alcoa Inc. is making a hostile bid for Canadian aluminium rival Alcan Inc. worth nearly $27 billion after failing in almost two years of private talks to reach a negotiated deal.Alcan's US shares rose 34 percent, well above the offered price in morning trading, suggesting investors think the bidding could go higher. Alcoa shares gained nearly 6 percent.
Montreal-based Alcan said its board "will consider the proposal" and advised shareholders to await its recommendation.
Alcoa said the proposed cash-and-stock deal would create a premier diversified global aluminium company which could grow faster than the two companies could on their own.
"I strongly believe in the merits of this transaction, and I know from almost two years of private discussions with Alcan that they also see the strategic logic behind this combination," said Alain Belda, Alcoa's chairman and CEO.
"I'm disappointed that we were not able to come to a negotiated transaction, and while I'm taking this offer to shareholders I hope that this combination can move forward with the support of Alcan management and board."
The combined company, with 188,000 employees in 67 countries, would have had revenue last year of $54 billion and earnings before interest, taxes, depreciation and amortisation of $9.5 billion.
The combined company's alumina capacity would be about 21.5 million metric tons, and its aluminium capacity would be approximately 7.8 million metric tons. Alumina is used to make aluminium.
New York-based Alcoa, which plans to maintain dual headquarters in Montreal and New York, sees annual pre-tax cost savings of about $1 billion from its proposed combination with Alcan in the third year after the deal closes. Alcan said in a statement its board "will consider the proposal and how it could impact the interests of Alcan's shareholders and other stakeholders."
Alcan recommended that shareholders wait until they see the Alcan board's decision before tendering to the Alcoa bid.
Alcan could become the latest Canadian company to taken over by foreign ownership. Belda said Alcoa has been in contact with three levels of government in Canada about the deal.
Alcoa founded Alcan in 1902, split it off as a separate company in 1928, and retained largely common ownership until 1951 when major shareholdings were divested by US court order.
Belda said he is confident the deal will be accepted.
Until recently both companies were the world's top two producers of aluminium, but they now lag behind Rusal of Moscow.
Rusal, its rival Sual and Swiss-based commodities trader Glencore International AG completed the combination of their assets at the end of March, creating United Company Rusal and surpassing Alcoa as the world's largest aluminium producer.
Alcoa is offering a combination of cash and stock that it said was worth $73.25 for each Alcan share, a 20 percent premium to Alcan's closing price on Friday of $61.03 and a 32 percent premium to Alcan's average closing price over the last 30 trading days.
With about 367 million shares outstanding, the offer values Alcan at nearly $27 billion. Alcoa said debt being assumed would boost the total value of the deal to $33 billion.
The bid includes $58.60 a share in cash and 0.4108 of an Alcoa share for each share of Alcan.
Alcan shares rose $20.77 to $81.80 in morning trading — above the offered price — while Alcoa shares gained $2.11, or 5.9 percent, to $37.77.
Alcoa said in announcing the offer yesterday that the companies have been in talks to do a deal for almost two years, including talks at the board level last fall. Alcoa decided to take its offer directly to shareholders due to the companies' inability to reach a negotiated deal.
Alcoa expects to begin its offer today.