U.S. News

Alcan Rebuffs Alcoa's Request for Takeover Talks


Alcan has rebuffed requests by Alcoa for a meeting to discuss Alcoa's hostile $28.6 billion offer for the Canadian aluminum producer, a regulatory filing showed on Tuesday.

Alcan's chief executive, Richard Evans, told Alcoa CEO Alain Belda in a letter that Alcan had no reason for any further discussion with Alcoa "at this time."

In an exchange of letters late last month included in a filing by Alcoa with the U.S. Securities and Exchange Commission, Belda had offered to meet Evans in Montreal to discuss Alcoa's offer, which Alcan has rejected.

In the correspondence, Belda refers to media reports that Alcan may have opened a data room for third parties to review its books. If so, Alcoa would welcome the chance to visit the data room, Belda wrote.

Alcan would not confirm or deny that it had opened a data room.

There has been speculation that big international miners such as BHP Billitonor Rio Tintomay be interested in poring over Alcan's books with a view to making an offer.

Alcoa spokesman Kevin Lowery said the company was amenable to signing a standstill agreement, but only if it accounts for the fact that Alcoa has already made an offer for Alcan.

"We said we would be happy to do that, but that the standstill aspect would have to be in the context of our existing offer," Lowery said.

"Our offer is still out there and our team stands ready to engage in conversation," he said.

Alcoa's offer expires on July 10, but the company has said in regulatory filings it would likely have to be extended.

Alcan said little had changed in Alcoa's position since it made its hostile offer directly to Alcan shareholders May 7.

"They had two years to make a compelling offer and they never did, and Alcoa has refused to sign a standard confidentiality and standstill agreement in that time," said Alcan spokeswoman Anik Michaud.

Alcan says Alcoa's refusal to sign a two-year confidentiality and standstill agreement -- under which each company would agree not to purchase shares of the other for a specified time -- was a key factor in the failure of talks between the two last year aimed at crafting a "merger of equals."

Alcan said Alcoa refused to sign a standstill agreement because the U.S. company wanted to keep the option of making a hostile offer for Alcan, which it eventually did.

Alcan is expected to unveil its own strategy in the coming weeks, indicating whether it wants to remain independent, find another suitor, or come to a friendly merger pact with Alcoa.

"Alcan has got to come up with a third party, and if not, make a proposal to Alcoa to convert the bid into a friendly offer at a better price," said analyst Charles Bradford, of Bradford Research/Soleil.

Bradford noted that Rio Tinto, which has been touted as a possible white knight for Alcan, just invested $1.8 billion in an alumina refinery expansion and said it would focus on internal growth and a share buyback.

"That's not the kind of thing you would do if you were going to bid for Alcan," Bradford said.