UBS: Alcan Worth More Than Alcoa Offering

Is the deal good enough? That's the question being asked following Alcoa Inc.'s (AA) US$73.25 a share hostile takeover bid for Alcan Inc. (AL).

“Investors are assessing numerous potential transactions that could include Alcan as a target or break-up candidate,” UBS analyst Brian MacArthur said in a note to clients.

As such, he evaluated Alcan's business using a sum of the parts analysis and concluded the company could be worth between US$79 and US$97 a share, adding multiple transactions may have to be overcome before such value is realized.

He raised his target price on Alcan from US$80 to US$87, but given the shares are up nearly 80% in 2007, trading above the Alcoa bid at around US$78.20, he downgraded his rating from “buy” to “neutral.”

Meanwhile, Mr. MacArthur said investors who question the Alcan bid, are suggesting Alcoa should be broken up as well.

Based on a similar sum of the parts analysis, he said Alcoa could be worth between US$44 and US$56 a share.

He maintained his “buy” rating and US$46 price target for the stock.