DOING SOME DIGGING Alcan Tries Again for Pechiney

"Hostile" is the word analysts use to described ALCAN INC.'s unsolicited take-over bid for French aluminu...


"Hostile" is the word analysts use to described ALCAN INC.'s unsolicited take-over bid for French aluminum producer PECHINEY SA. Undoubtedly, to the Alcan executive team the move is "good business sense". Control of Pechiney would roughly double Alcan's annual revenue (to nearly US$24 million) and vault it ahead of ALCOA as the No.1 global aluminum producer.

This isn't the first time the two companies have talked of combining their assets. In 1999 they agreed to a friendly three-way mergerAlcan, Pechiney and ALGROUP AG of Switzerlandonly to be turned down by European regulators. Alcan was allowed, however, to buy up Algroup.

Now Alcan has offered 41 per Pechiney share, a 28% premium over the July 2 closing prices and 39% over the one-month average. Alcan president and CEO Travis Engen said, "I am convinced that Alcan's offer represents an exceptional opportunity for both Pechiney and Alcan, and that now is the right time to seize it."

Pechiney directors disagree, expressing "surprise" at the unfriendly nature of the offer. They said "no" and called Alcan's offer "clearly inadequate". Pechiney also announced that it has retained BNP Paribas, Goldman Sachs, JP Moran, and Rothschild & Cie to advise it on the matter.

The war of words is heating up. Rumours abound: Alcan will sweeten its offer; Pechiney has attracted another bidder; no other company is interested in Pechiney; Alcan could lose a bundle if it wins and its projections are wrong.

This situation reminds me of the animated Fording-Sherritt wrangling for control of Canada's coal industry last year. I find it rather entertaining to watch this sort of corporate shoot out, especially as it's not my money they are taking pot-shots with. Well, we shall see how it ends. Alcan has a lot at stake, Cdn$5 billion and more, if it is going to be the world's largest aluminum producer.


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