The Telegraph
Since 1st March, 1999
Email This Page
Alcan stalks Pechiney with $ 3.9-bn bid

Paris, July 7 (Reuters): Canada’s Alcan Inc on Monday launched a hostile € 3.4 billion ($ 3.9 billion) cash-and-stock bid for French rival Pechiney, in a deal that would create the world’s largest aluminium group by revenues.

Alcan said it would offer € 123 in cash and three new Alcan shares for five Pechiney shares, valuing the French company at € 41 per share — a 20.5 per cent premium to its closing share price on Friday.

The Canadian aluminium giant, which was holding a news conference in Paris to present the offer, estimated the deal would be completed within four or five months and would generate $ 250 million in annual costs savings.

If successful, it would create a group with annual pro forma revenues of $ 24 billion, vaulting it above current world number one Alcoa, which posted 2002 sales of $ 20.3 billion.

The offer comes a little more than three years after Alcan, Pechiney and Switzerland’s Algroup were forced to abandon a planned three-way merger because of objections by the European Commission.

After Pechiney withdrew from that deal, Alcan went on to acquire Algroup.

Pechiney has been unable to seal another major deal since then. Earlier this year, a planned € 750 million purchase of Corus Group Plc’s aluminium assets was blocked by Corus’s Dutch arm.

“Alcan is convinced that the fundamental strategic logic of the proposed (Alcan-Pechiney-Algroup) transaction, which was endorsed at the time by Pechiney’s then and current CEO, remains valid and compelling,” Alcan said in a statement.

Caught unawares

The Montreal-based firm said its management had met on July 4 and 5 with Pechiney chief executive Jean-Pierre Rodier to present the offer, but Pechiney said the bid had taken it by surprise.

“Pechiney is astonished at the unfriendly nature of this process,” the company said in a statement. “The offer very significantly undervalues the economic and strategic worth of Pechiney.”

Referring to the possibility of new objections from European competition authorities, Pechiney said execution of the transaction was “highly uncertain”.

There is no precedent for a hostile foreign bid of this scale succeeding in France.

The opening of Pechiney shares, which popped to a six-month high last week amid speculation the firm could be a takeover target, was delayed until 1100 GMT following the bid.

Bonds of Alcan fell in value in early trading, with its 5.5 per cent May 2006 Euro bond bid at 65 basis points over comparable government debt. Three-month aluminium prices traded on the London Metals Exchange are currently quoted at about $ 1,380 a tonne, up from a 1999 low under $ 1,200 a tonne but well off highs of some $ 2,200 a tonne in 1995.

Alcan said it expected the deal to enhance earnings per share, core EBITDA earnings and free cash flow from the first year.

Alcan said it held confidential preliminary discussions with the European Commission and might be required to dispose of certain European businesses, operations or assets of either or both firms.

Email This Page