Analysts Skeptical of BHP Bid for Alcoa, Alcan; Shares of All Three Rise

Separate reports involving Australia's BHP Billiton say the firm is considering a rival, white knight bid for Alcan -- which has received a $28.7 billion hostile bid from Alcoa -- or a $40b takeover bid for Alcoa, per The Times of London. Reuters cited sources familiar with the matter between BHP-Alcan, and said BHP has hired Merrill Lynch. A BHP spokesman said, "We don't comment on market rumours," when asked about reports of both deals. An ABN Amro analyst is skeptical, noting BHP would likely have to sell either target's manufacturing assets after paying a premium for them. He also said aluminum has lagged other metals. MarketWatch cited two analysts who were equally doubtful of a deal. One called a BHP bid for either company "rubbish," since, as the ABN Amro analyst said, BHP has no interest in their downstream assets. Bloomberg reports credit-default swaps of BHP rose in Australia, out of concern it may need to take on debt in order to finance a takeover. BHP's ordinary shares were up 0.7% to A$34.92 at the close of Tuesday trading. Shares of Alcoa rose 0.7% to $41.88 in normal trading Monday, while Alcan gained 0.8% to $83.55 and BHP's ADRs rose 1.3% to $58.60.

Sources: AFX newswire, Bloomberg, MarketWatch, Reuters
Commentary: BHP's Incoming CEO Expresses Interest In Bidding For Alcoa • Alcoa Could Still Get Alcan With An Increased Offer • Alcan Rejected Marriage Proposal; Now Alcoa Has Something to Prove
Stocks/ETFs to watch: BHP Billiton (BHP), Alcoa (AA), Alcan (AL). Competitors: Rio Tinto plc (RTP), Anglo American plc (AAUK), Companhia Vale do Rio Doce (RIO). ETFs: Materials Select Sector SPDR (XLB), iShares Dow Jones US Basic Materials Index (IYM), Vanguard Materials VIPERs (VAW)
Conference call transcripts: Alcoa Q1 2007

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