Alcoa offers to buy Alcan for $27 billion

/ Source: The Associated Press

Alcoa Inc. is making a hostile bid for Canadian aluminum rival Alcan Inc. worth nearly $27 billion after failing in almost two years of private talks to reach a negotiated deal.

Alcoa said the proposed cash-and-stock deal would create a premier diversified global aluminum company which could grow faster than the two companies could on their own.

Alcan’s U.S. shares rose nearly 25 percent in premarket trading while Alcoa shares lost nearly 2 percent.

The combined company, with 188,000 employees in 67 countries, would have had revenue last year of $54 billion and earnings before interest, taxes, depreciation and amortization of $9.5 billion.

The combined company’s alumina capacity would be about 21.5 million metric tonnes, and its aluminum capacity would be approximately 7.8 million metric tonnes. Alumina is used to make aluminum. A metric tonne is about 2,204.6 pounds.

New York-based Alcoa sees annual pretax cost savings of about $1 billion from its proposed combination with Alcan in the third year after the deal closes.

Calls to Montreal-based Alcan representatives were not immediately returned.

The company is offering a combination of cash and stock that it said was worth $73.25 for each Alcan share, a 20 percent premium to Alcan’s closing price Friday of $61.03 and a 32 percent premium to Alcan’s average closing price over the last 30 trading days.

The bid includes $58.60 a share in cash and 0.4108 of an Alcoa share for each share of Alcan.

With about 367 million shares outstanding, that values Alcan at nearly $27 billion. Alcoa said debt being assumed would boost the total value of the deal to $33 billion.

Alcoa said in announcing the offer on Monday that the companies have been in talks to do a deal for almost two years, including merger talks at the board level last fall. Alcoa decided to take its offer directly to shareholders due to the companies’ inability to reach a negotiated deal.

Alcoa expects to begin its offer on Tuesday.