Alcoa offers $33 billion for rival Alcan
By Tom Stundza -- Purchasing, 5/7/2007 8:42:00 AM
Alcoa has made an offer to acquire aluminum rival Alcan in cash and stock deal valued at about $33 billion. The hostile bid would create a giant player in the aluminum industry since Alcoa and Alcan combined had 2006 revenue of $54 billion and have 188,000 employees in 67 countries.
"This offer follows almost two years of discussions between our companies regarding a variety of potential" deals, including unsuccessful board-level merger talks last fall, Alcoa Chairman and Chief Executive Alain J.P. Belda said in a statement. "We are very disappointed that those efforts did not result in a negotiated transaction - a conclusion we would have strongly preferred," he continued. "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." Alcoa expects a merger to create pretax cost savings of about $1 billion a year starting in the third year after the deal's closure, notably in the areas of smelting and refining and sales, plant and procurement costs. Per-share earnings are expected to increase within a year of the takeover being completed, with Alcoa saying the deal is also projected to generate "substantial" free cash flow that would allow for the company to "rapidly" pay down acquisition-related debt.
The Wall Street Journal this morning is reporting that rumors of a large aluminum deal have floated for more than a year, heating up again in February after the Times of London reported BHP and Rio Tinto had both "drawn up plans" for a $40 billion takeover of Alcoa. Rio Tinto and BHP declined to comment on the speculation, and Alcoa officials at the time played down the report. Still, there have been a number of smaller takeover deals in the sector. Hindalco Industries Ltd. agreed in February to acquire Novelis Inc., a maker of rolled aluminum used in products such as beer cans and cars, for $3.6 billion plus debt. In March, Russian companies OAO Rusal and Sual and Switzerland-based Glencore AG completed their three-way merger that created United Company Rusal, which is battling Alcoa for the position of the world's largest producer of primary aluminum.
Blog from the NY Times to the Alcoa/Alcan story.
Now Playing: 