Alcan's Board Advises Rejecting Alcoa's Bid; BHP in Talks with Alcan -- report

Alcan's Board of Directors unanimously recommended shareholders reject Alcoa's $27.6 billion unsolicited takeover offer Tuesday, sending shares of both firms higher in extended trading. An article published early Wednesday by the Globe and Mail reported Alcan's CEO Dick Evans said the Company is in "ongoing discussions with other third parties," with sources saying it has begun talks with BHP Billiton. Evans reportedly refused to rule out any scenario, even one where Alcan would launch a bid for Alcoa. Shares of Alcoa lost 0.1% to $38.95 in normal trading, but gained 1.8% to $39.64 in after-hours activity. Alcan also lost 0.1%, to $81.03, but climbed 3% in extended trading to $83.50. BHP's ADRs lost 1.6% to $50.75. A BHP spokeswoman declined to comment. Alcoa said it is studying Alcan's response. Alcoa's offer of $58.60 and 0.4108 of its shares, values Alcan at around $75/share, or about 11% below its last trade in the after-hours. In a press release Tuesday, Alcan's Chairman of the Board said Alcoa's offer "does not adequately reflect the value of Alcan's extremely attractive assets, strategic capabilities and growth prospects, does not offer an appropriate premium for control of Alcan, and is highly conditional and uncertain."

Sources: Press release, Globe and Mail
Commentary: Alcan/Alcoa Merger: This One Won't Be Easy • UBS: Alcan Worth More Than Alcoa Offering • Alcoa to Make Hostile Bid for Alcan
Stocks/ETFs to watch: Alcoa Inc. (AA), Alcan Inc. (AL), BHP Billiton (BHP). Competitors: Aluminum Corp. of China Ltd. (ACH), Novelis Inc. (NVL), Kaiser Aluminum Corp. (KALU), Quanex Corp. (NX), Tredegar Corp. (TG), Arcelor Mittal (MT). ETFs: SPDR Metals & Mining (XME), PowerShares FTSE RAFI Basic Materials ETF (PRFM), Vanguard Materials VIPERs (VAW)
Conference call transcripts: Alcoa Q1 2007

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