Speculation Takeover Continues For Alcan, Alcoa: BHP, Rio Tinto Front-Runners

 |  Includes: AA, AAUKY, AL (defunct), BHP, RIO, VALE
by: FP Trading Desk

By this time next year, BHP Billiton Ltd. (NYSE:BHP) will likely own Alcoa Inc. (NYSE:AA) and Rio Tinto (RTP) should own Alcan Inc. (AL (defunct)), an unnamed source told the Sydney Morning Herald, adding that Alcan has opened a data room so the Anglo-Australian mining giants can examine its books.

As Alcan tries to fend off a hostile US$27.7-billion takeover offer from its U.S. rival Alcoa, BHP and Rio have been cited as the most likely candidates to serve as a white knight for Alcan.

BHP, Rio and Alcan all declined to comment on the report, Bloomberg News reported.

``I can't comment on rumors,'' Anik Michaud, an Alcan spokeswoman told Bloomberg. ``I'm not confirming or denying.''

Other recent reports suggest BHP has hired Merrill Lynch as its advisor in a possible bid for either Alcan or Alcoa, which could eventually come from a consortium of bidders who would divide the assets.

BHP CEO Chip Goodyear is set to step down in October and will be replaced by Marius Kloppers, who was key in creating the company’s aluminum business. Other possible parties interested in pursuing Alcan include private equity, CVRD (NYSE:RIO), Rusal, Anglo American (AAUK), Xstrata and groups from China.

The source told the Herald rival bidders would likely file objections to Alcoa's bid for Alcan based on competition grounds, in an attempt to frustrate Alcoa and prolong the process.

UBS analyst Glyn Lawcock told Dow Jones that there is a chance BHP and Rio could bid for Alcan if they have been given access to its data room, but this would unlikely come anytime soon.

“If the data room stacks up and they can find private equity who are prepared to pay them a reasonable price for the downstream assets then there is every possibility that they would have a go, but there is no rush,” he said. “Alcoa is going to be tied up with antitrust getting through regulatory hurdles for a number of months so there is no real need to move quickly, but it makes perfect sense to go have a look.”

Mr. Lawcock thinks BHP and and Rio are more likely to bid for Alcan than for Alcoa.