Alcoa and Alcan: Don't Be Surprised if Other Mining Giants Get Involved

While the world’s largest aluminum players had apparently been in talks for almost two years regarding various business combinations such as a merger, Monday’s US$33-billion bid by Alcoa (AA) for its rival Alcan (AL), which includes US$6-billion in debt, seemed to surprise most observers.

However, given the US$1-billion in synergies Alcoa says the deal would create, other merits of a possible merger, the wave of consolidation in the metals industry and the quest for size, the fact that the two companies were in talks doesn’t seem that strange.

Aluminum names have not really played a role in the wave of consolidation that’s taken place in the metals industry over the last couple of years.

So while Alcoa and Alcan may be late to the party, there has been no shortage of speculation about either company leading up to this news.

Perhaps if Inco and Falconbridge pursued a combination ten or twenty years ago, international mining majors would be the targets of Canadian giants, not the other way around.

Given the movement of both Alcan and Alcoa shares, the market appears to be expecting more participants will enter the fray.

Alcan was up more than 30%, well above Alcoa’s bid, while Alcoa saw its own shares rise as the market may now consider it a takeover target.

So don’t be surprised if there are several twists and turns before it is all said and done.

Inco-Falconbridge-Teck Cominico-Xstrata-Phelps-CVRD wasn’t that long ago. Mind you, there have been plenty of metals and mining deals since then.

Comments

[Mr. Finance:]

Alcoa's unsolicited bid for Alcan, probably involved a number of individuals who were or are deeply connected in the network of board of directors. The extend of the board interrelationships of these two organizations can be best represented by IntellectSpace's dynamic Knowledge Map (URL Below).

Most notable Board relationships between between Alcoa and Alcan include:

Alcoa - Henry Chacht - Warburg Pincus - Jeffrey Garten - Alcan
Alcoa - Franklin A Thomas - Citicorp/Citibank - H Onno Ruding - Alcan
Alcoa - Franklin A Thomas - Citicorp/Citibank - Lawrence E Fouraker - Alcan
Alcoa - Paul H O'Neill - GM - Guy Sait Pierre - Alcan
On an interactive Knowledge Map, to see the details (dates, titles, etc) of the board positions denoted by colored lines, just hover your mouse (granted that you are using Internet Explorer as your browser). To "drill down" into the details of the relationship, just double-click on a given relationship line.

An interactive version of the Knowledge Map can be found here (Internet Explorers only): fn.intellectspace.com/...

IntellectSpace's analysis involving not just board members, but also non-profit affiliations, organization memberships, investments, education and other types of relationships of the Alcoa/Alcan's board further "tangles the web."

For example: James Pasman, Henry Schacht, Klaus Kleinfield, Kenneth Dam, Paul O'Neill, Ernasto Zedillo, and James Owens (all of whom have or had a board affiliation of Alcoa) are members of the Business Council, Council of Foreign Relations, Business Roundtable, Conference Board, and Trilateral Commission.

A complete IntellectSpace Knowledge Map representing these extensive relationships is available here: fn.intellectspace.com/...

2007 May 08 11:00 AM