Alcan Acquiesces To Cash Deal With Rio Tinto

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

Alcan Inc. (AL (defunct)) has agreed to a US$38.1-billion takeover offer from Anglo-Australian mining giant Rio Tinto Plc (RTP) that would give shareholders US$101 per common share in an all cash deal. The offer represents a premium of 65.5% to Alcan’s all-time high closing share price of US$61.03 on May 4, prior to Alcoa Inc.'s (NYSE:AA) hostile takeover offer, Rio Tinto said in a statement.

The price tag also represents a premium of 32.8% to the value of Alcoa’s current offer of US$76.03, based on Alcoa’s closing share price on 11 July 2007.

Rio Tinto's new aluminum group, named Rio Tinto Alcan, will have its global headquarters in Montreal and will be led by Alcan's current chief executive Dick Evans. The companies have also agreed to divest Alcan's packaging business.

"We are pleased to have achieved this outstanding result for Alcan’s shareholders while being able to offer compelling opportunities for our employees as part of an extremely strong, diversified global organization with an expanded presence in Montreal," Mr. Evans said in a statement. "I am personally delighted and excited by the opportunity of leading the new larger aluminum group, Rio Tinto Alcan."

Alcoa's cash and stock offer for Alcan worth US$27-billion in May sent shares of the rivals higher, as the market immediately considered both companies in play. While some may consider Rio Tinto's offer for the Canadian aluminum producer both late and expensive, the move nonetheless puts the ball in Alcoa's court as to whether it wants to continue its pursuit.

Rio Tinto rival BHP Billiton Plc (NYSE:BHP) appears to be in the hunt for Alcoa.

Aluminum has lagged the strong rally of other commodities in recent years.

Rio Tinto said the Alcan combination would produce the largest producer of aluminum and bauxite in the world, based on current production, and is also planning to take the lead in alumina as well. Rio Tinto also said it will add three new members to its board: two non-executive members of Alcan's board and Mr. Evans. Rio Tinto will add three new members to its board: two non-executive members of the Alcan and Mr. Evans as CEO of the aluminum product group.

The company also said it plans to pursue a listing of Rio Tinto plc shares on the Toronto Stock Exchange.

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