The aluminium industry will remain in the spotlight this week following the $33bn (£17bn) hostile bid by Alcoa of the US for Canadian rival Alcan last Monday, with increasing speculation that other companies are preparing competing bids.
To add to the anticipation of rival Alcan bids, there is talk that offers for Alcoa could emerge. The US group was widely seen as a take- over target before its move on Alcan and some analysts believe it remains vulnerable.
On the day it launched its offer for Alcan, Alcoa's shares rose, which was interpreted as a sign that the market thinks the predator could become the prey. In most bid situations, the bidder's share price falls.
A combination of Alcoa and Alcan, the second- and third-largest aluminium producers in the world, would create a metals company worth more than $60bn. It would be by far the largest aluminium producer and would be double the size of its nearest rival, Rusal of Russia. The merged entity would have 188,000 employees, annual revenues of $54bn and capacity to produce 7.8m tonnes of aluminium and 21.5m metric tons of alumina, the raw material for aluminium, each year. Alcoa has said that the deal would give annual cost savings of about $1bn.
However, size could provide a barrier to the deal. Alcan and Alcoa already dominate many parts of the aluminium industry, such as supply of specialist aluminium to aerospace companies, and there are likely to be antitrust objections to the combination.
The antitrust concerns and the hostile nature of Alcoa's bid for Alcan could create opportunities for other companies to step in. One London-based banker said he expected at least one rival bidder to emerge for Alcan and that Alcoa would be forced to raise its bid. "It is unlikely that Alcoa gets to buy Alcan for this price." He highlighted Rusal, CVRD of Brazil and UK-listed Xstrata as potential bidders.
In the North American market, speculation is focusing on BHP Billiton, the world's largest mining company, which has a sizeable aluminium business.
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