Alcoa (AA.N: Quote) said on Monday it would make a hostile bid for Canada's Alcan Inc. (AL.TO: Quote) (AL.N: Quote) for nearly $27 billion, after talks between the two aluminum producers failed to lead to a deal.
If successful, the bid would create the world's largest producer of the metal, which is used in products ranging from beverage cans to airplanes.
The value of the bid in cash and Alcoa stock rose to $74.47 per Alcan share during the day from an initial $73.25 as Alcoa's shares gained 8.3 percent. But expectations that a higher bid may surface drove Alcan's shares well beyond the price and they ended up 34.5 percent at $82.11 in New York.
"The starting gun has just gone off," said John Ing, analyst and president of Maison Placements Inc. "As for possible suitors, it's pretty well anybody nowadays. Nobody is immune from takeover ... There's so much liquidity around, that there are a lot of companies that would be interested."
Most big metals and mining companies have been seen as possible buyers for Alcan, industry sources said. That list would include Anglo-Australian majors Rio Tinto (RIO.AX: Quote)(RIO.L: Quote) and BHP Billiton (BHP.AX: Quote)(BLT.L: Quote), Anglo American Plc (AAL.L: Quote), Brazil's CVRD (VALE5.SA: Quote) (RIO.N: Quote), Norway's Norsk Hydro (NHY.OL: Quote) and Russia's United Company RUSAL, among others.
BHP in Melbourne declined to comment. Rio Tinto could not be immediately reached, though the company in the past has refused to comment on speculative issues.
"With the commodities markets so strong, only the foolish wouldn't be looking to get bigger," said BNP Paribas analyst David Thurtell.
Alcoa Chief Executive and Chairman Alain Belda said the planned link-up would better position the company to compete with fast-growing competitors. That group includes players such as Russia's RUSAL and China's Chalco (601600.SS: Quote), which saw its value nearly triple with its listing in Shanghai last week.
"Emerging global players in Russia, China, India and the Middle East are quickly expanding and adding capacity on a global basis," Belda told a conference call.
Montreal-based Alcan, which was split off from Alcoa in the 1920s because of antitrust concerns, said it planned to consider the proposal and advised shareholders to wait until it has fully reviewed the offer.
"I just think that Alcan was perennially undervalued and it was inevitable something like this would happen," said John Redstone, an analyst at Desjardins Securities.
An Alcoa-Alcan combination would control about 25 percent of the alumina raw material and primary aluminum markets and put its production capacity well above that of rival RUSAL.
"The mentality in the marketplace right now dictates that if you don't go after a company, someone else will," said Rob Nachum, managing director of Adelaide-based mining research group Minalysis.
Alcoa said its move comes after nearly two years of talks between the companies ended in November without a merger agreement. It put the enterprise value of the deal at $33 billion, including $6 billion in debt.
"We are very disappointed that those efforts did not result in a negotiated transaction -- a conclusion we would have strongly preferred," said Belda, adding, "therefore we are taking our offer directly to Alcan shareholders."
Alcoa, which is the world's largest aluminum seller in terms of revenues, said the combined company would see finished aluminum production capacity of 7.8 million tonnes compared with RUSAL's 4 million tonnes.
Its alumina capacity, the raw material used for the metal, would be 21.5 million tonnes versus RUSAL's 11 million.
The bid of $58.60 in cash and 0.4108 per share of Alcoa common stock represents a 32 percent premium to Alcan's average closing price on the New York Stock Exchange over the last 30 trading days.
Alcoa shares rose $2.97,
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