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[May 2007]
Alcoa to Offer to Acquire Alcan for US$73.25 Per Share in Cash and Stock
Alcoa Inc (New York, USA) is making an offer to acquire all of the outstanding common shares of Alcan Inc (Montréal, Québec, Canada) for US$58.60 in cash and 0.4108 of a share of Alcoa common stock for each outstanding common share of Alcan. Alcoa said that the transaction would create a premier diversified global aluminium company with a complementary portfolio of assets and enhanced growth opportunities and better position the combined company to build value for shareholders.
Based on Alcoa's closing stock price on 4 May 2007, the offer has a value of US$73.25 per Alcan share or approximately US$33 billion in enterprise value. The Alcoa offer represented a 32% premium to Alcan's average closing price on the NYSE over the previous 30 trading days and a 20% premium to Alcan's closing price on 4 May 2007, its all-time high.
Commenting on the offer, Alain Belda, Chairman and CEO of Alcoa, stated: “This offer follows almost two years of discussions between our companies regarding a variety of potential business combination transactions, including unsuccessful Board-level discussions of a merger transaction last fall. We are very disappointed that those efforts did not result in a negotiated transaction – a conclusion we would have strongly preferred. We believe firmly in the compelling strategic rationale behind the combination of Alcoa and Alcan and are convinced that this transaction creates substantial value for both sets of shareholders and for our customers around the world. We are therefore taking our offer directly to Alcan shareholders.”
Alcoa asserted that the combination of Alcoa and Alcan would create a stronger, more diverse global competitor with the scale and cost structure to be competitive over the long term within a rapidly changing industry landscape. Alcoa and Alcan would bring together a complementary portfolio of businesses and benefit from a broader talent base, enhanced research and development expertise and shared values. The combined company would also have a better balance of growth projects. Together, Alcoa and Alcan would be better able to prioritise and execute on key expansion and modernisation projects, and maximise performance improvement opportunities from sharing best practices and leveraging procurement.
Mr Belda said: “The combination of Alcoa and Alcan will significantly deepen an already extensive commitment by both companies to Canada, and it will ensure that Canada remains a world leader in the mining and metals industry. The new company will have dual head offices in Montréal and New York, with strategic management functions located in each city. Montréal also will become the headquarters for our global primary products business, which will increase the size and importance of the global business headquartered in Canada”.
The combined company will have a significantly enhanced financial profile. Alcoa expects the combination to generate pre-tax cost synergies of approximately US$1 billion annually once fully implemented in the third year following closing. Key sources of synergies include operational improvements in the areas of smelting and refining, overhead improvements such as sales and general administrative expense and plant costs and procurement. The transaction is expected to be accretive to both cash flow per share and earnings per share within the first year of operation as a combined company. The combined company will generate substantial free cash flow that will enable it to rapidly reduce acquisition-related debt, while continuing to invest in growth opportunities.
On an aggregate basis for 2006, the combined company would have had revenues of US$54 billion and EBITDA of US$9.5 billion, before synergies. In 2006, the combined company's alumina capacity would have been approximately 21.5 million tonnes and its aluminium capacity would have been approximately 7.8 million tonnes. In addition, the combined company would have approximately 188,000 employees in 67 countries.
“Alcoa has completed a number of large acquisitions in recent years and we have a proven track record of successfully integrating companies to generate shareholder value. We also have a history of excellent relations with employees in transitional situations and look forward to creating a 'best in class' management team drawing on the strengths of both companies,” said Mr Belda.
Alcoa is targeting completion of the transaction by the end of 2007.
www.alcoa.com
ENDS