Alcoa, the world’s largest aluminum company, said on Monday it would make a hostile bid for Canada’s Alcan, estimated at $27-billion, after talks between the rivals failed to lead to a deal.
If successful, the bid of $73,25 per share in cash and stock would create the the world’s largest producer of the metal that is used for products ranging from beverage cans to airplanes, cars and heavy machinery parts. Russian rival Rusal is the current volume leader.
The bid of $58,60 in cash and 0,4108 per share of Pittsburgh-based Alcoa common stock would represent a 32% premium to Alcan’s average closing price on the New York Stock Exchange over the last 30 trading days.
”I just think that Alcan was perennially undervalued and it was inevitable something like this would happen.” said John Redstone, analyst at Desjardins Securities.
Alcoa said its move comes after nearly two years of merger discussions between the companies that failed to a yield an agreement. It put the enterprise value of the deal at $33-billion, including $6-billion in debt.
”We are very disappointed that those efforts did not result in a negotiated transaction — a conclusion we would have strongly preferred,” Alain Belda, chairperson and chief executive officer of Alcoa, said in a statement.
Alcoa expects a merger of the two companies would create cost savings of $1-billion per year after three years.
”We believe firmly in the compelling strategic rationale behind the combination of Alcoa and Alcan and are convinced that this transaction creates substantial value for both sets of shareholders and for our customers around the world. We are therefore taking our offer directly to Alcan shareholders,” he added.
Australian rival BHP Billiton had been cited by analysts as a more likely buyer for Alcan, largely because of difficulties of getting regulators to approve an Alcoa-Alcan link-up.
”It seems like a lot of people were talking about Alcan as a potential takeover. I don’t think Alcoa was ever viewed as a likely purchaser just because of the antitrust reasons,” said David Whetham, resource fund manager at Scotia Cassels.
”They must think they can solve it,” he added.
Earlier this year, Alcoa’s shares soared on reports that BHP Billiton and Rio Tinto were looking to acquire the US aluminum giant.
Alcoa said the new company would have dual head offices in New York and Montreal and would have had combined revenues of $54-billion on an aggregate basis in 2006.
Total alumina capacity, the raw material used for the metal, would be 21,5-million tonnes, with finished aluminum capacity of 7,8-million tonnes.
That would put the proposed Alcoa-Alcan combination well ahead of Russia rival Rusal, which last year agreed to form United Company Rusal with SUAL and Swiss-based Glencore International. That company would have a production capacity of 4-million tonnes of aluminum and 11-million tonnes of alumina.
Alcoa last month said it may sell three of its units, in a move that would help the company focus on its core aluminum production operations.
Alcan’s shares surged 21,25% in US trading before the opening bell while Alcoa shares slipped 1,85% before the bell. – Reuters