The first skirmish is over, but many suggest that the final battle is not far off. Alcan the huge Canadian aluminum company with a major presence in the Northwest has said thanks, but no thanks to American based Alcoa in its hostile take over bid.
But, analysts say that this most recent attempt to take over the aluminum company may just be the warning shot of more to come. In a pre-emptive move, the Globe and Mail is reporting that Montreal based Alcan is in discussion with BHP Billiton of Australia, currently the world’s third largest aluminum company.
The game of musical chairs in the aluminum world comes as the large corporations become targets for takeover apparently from each other, last year Alcan was approached by BHP to explore merging resources, only to have Alcan turn them down.
Now, in a bid to thwart Alcoa’s bid to takeover the company, (Alcan reportedly believes that Alcoa has vastly undervalued their bid for the Canadian operation), Alcan instead is looking further a field hoping to find an investor willing to come closer to its expectations.
What all this might mean for Alcan as a Canadian institution and for Kitimat as a major producer remains to be seen. There has been a number of high profile Canadian companies becoming the hunted of late, part of the increasingly rapid pace of globalization, which treats world borders as nothing more than lines on a map.
But, analysts say that this most recent attempt to take over the aluminum company may just be the warning shot of more to come. In a pre-emptive move, the Globe and Mail is reporting that Montreal based Alcan is in discussion with BHP Billiton of Australia, currently the world’s third largest aluminum company.
The game of musical chairs in the aluminum world comes as the large corporations become targets for takeover apparently from each other, last year Alcan was approached by BHP to explore merging resources, only to have Alcan turn them down.
Now, in a bid to thwart Alcoa’s bid to takeover the company, (Alcan reportedly believes that Alcoa has vastly undervalued their bid for the Canadian operation), Alcan instead is looking further a field hoping to find an investor willing to come closer to its expectations.
What all this might mean for Alcan as a Canadian institution and for Kitimat as a major producer remains to be seen. There has been a number of high profile Canadian companies becoming the hunted of late, part of the increasingly rapid pace of globalization, which treats world borders as nothing more than lines on a map.
As for the Kitimat operation, Kitimat works has been a controversial place of late, due to the sometimes heated debate over power sales and plant modernization, what the governments of BC and Canada might have to say about a foreign corporation having a large role in the distribution of energy and what that holds for the employment base in Kitimat remains to be seen.
The latest moves in the international arena are sure to have a major impact locally; it’s just a matter of waiting to see what comes next. The high finance maneuvering should make for more nervous times for the folks in Kitimat, who have already seen more than their share of uncertainty.
The latest moves in the international arena are sure to have a major impact locally; it’s just a matter of waiting to see what comes next. The high finance maneuvering should make for more nervous times for the folks in Kitimat, who have already seen more than their share of uncertainty.
Alcan searching for white knight
ROMA LUCIW
Globe and Mail Update
May 23, 2007 at 2:18 PM EDT
TORONTO — The fight for Alcan Inc. is far from over, analysts said Wednesday after the Canadian aluminum maker dismissed a hostile takeover attempt from U.S. rival Alcoa Inc. as inadequate and instead looked to global mining giant BHP Billiton Ltd.
Montreal-based Alcan rejected Alcoa's bid, worth $28.4-billion (U.S.) or $73.25 a share, Tuesday night, arguing that it undervalues the company and is “highly conditional and uncertain.” According to people familiar with the matter, Alcan has entered early-stage discussions with Australia's BHP Billiton, the third-largest aluminum player in the world.
“At this point we believe the company needs more time to evaluate its strategic options,” Bank of America analyst Kuni Chen said in a note. “Ultimately we believe Alcan is worth $80 to $90 on a takeout, based on our initial estimates.”
He has a $86 price target and a “neutral” rating on Alcan shares, but said there was up to $2 of potential growth if the Alcoa bid is successful.
Investors appeared to be pricing in a higher bid. Shares of Alcan rose $3.14 (Canadian) or 3.56 per cent to $91.36 in Toronto on Wednesday and $3.43 (U.S.) or 4.23 per cent to $84.46 in New York. Alcoa stock climbed $1.56 or 4 per cent to $40.51.
In the regulatory filing, Alcan said the Alcoa bid does not adequately reflect its assets, strategic capabilities, and growth prospects. “Furthermore, it is clear to us that Alcan and Alcoa have fundamentally different approaches and track records in creating shareholder value,” the company said.
Alcan also suggested that Alcoa threatened it with a hostile offer last fall, and said one of the main reasons Alcoa pushed for a deal was that it feared becoming a target itself.
In an interview with The Globe & Mail , Alcan chief executive officer Dick Evans said the company was considering all of its options and refused to rule out any scenario – including one in which Alcan would turn the tables by launching its own bid for Alcoa.
Mr. Evans also said that Alcan is in “ongoing discussions with other third parties” and although he declined to identify them, sources said the Canadian company had started discussions with BHP. BHP approached the company about a possible union late last year, but was rebuffed, sources said. Rio Tinto PLC has been cited by several industry observers as another logical suitor for Alcan.
Scotia Capital analyst Onno Rutten said Wednesday he believes there is “scope for a go-friendly bump by Alcoa, based on Alcan's characterization of prior merger discussions.”
He estimates that there is a 55 per cent chance that a friendly white-knight bid will emerge, a 20 per cent chance of a “go-friendly bump” by Alcoa, a 20 per cent chance of a bidding war or auction, and a 5 per cent chance of a defensive transaction.
“Alcan appears to be making all the right moves to maximize value, but has not yet embarked on an all-out auction process,” Mr. Rutten said. However, he warned that Alcan's share price could fall if the company enters a defensive acquisition or fails to secure a higher offer from Alcoa, especially if they do not attract any other bidders.
With files from Sinclair Stewart, Andy Hoffman, Andrew Willis and Boyd Erman.
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