Jana Partners LLC, a shareholder of Alcoa Inc. called Tuesday for the aluminum giant to drop its efforts to acquire Canadian rival Alcan Inc. and, instead, put itself up for sale.
Jana, an activist hedge fund, describes itself as a "large" Alcoa holder.
In a letter sent Tuesday to Alcoa Chairman and Chief Executive Alain J.P. Belda, Jana Managing Partner Barry Rosenstein stated that, "Given Alcoa's long history of failing to generate shareholder value through acquisitions, we believe that its greatest value can be realized through a sale or break-up of the company."
Kevin Lowery, director of corporate communications at Alcoa, said, "Alcoa's board of directors carefully reviewed a complete range of strategic options and concluded the transaction we proposed yesterday is in the best interest of Alcoa and its shareholders. The combination of Alcoa and Alcan offers significant upside for Alcoa shareholders and positions us to compete more effectively in a changing global industry. We have a proven track record of delivering on targeted synergies and effectively integrating acquisitions."
Several analysts have called Alcoa a potential acquisition target despite the hostile, $26.9 billion takeover bid that it announced Monday for its chief rival Alcan.
Intentionally or not, "what I think (Alcoa) did (Monday) is basically put themselves into play," Soleil Securities analyst Charles Bradford said Tuesday.
He said Alcoa's discussion of synergies and possible divestitures if the Alcan bid goes through likely caught the attention of potential acquirers, renewing interest in Alcoa as a target.
Still, only a large mining player probably could make such a move, Bradford said, citing BHP Billiton Ltd. (BHP) and Rio Tinto PLC (RTP) in particular. Both companies have been rumored to be interested in Alcoa or Alcan in the past.
Alcoa shares were up about 2.2% at $39.46 in recent trading. The stock jumped 8.3% Monday, to finish at $38.63, after the New York company announced its hostile bid for Alcan.
In his letter, Rosenstein said the sharp increase in Alcoa's stock price Monday "has more to do with speculation that Alcoa is a target than its acquisition plans."
The rise isn't "the result of any confidence in management's skill as acquirers," he said.
Alcoa executives, who on Monday said they launched their Alcan bid after nearly two years of talks failed to produce a friendly agreement, contend that the two companies are a good fit in an increasingly competitive aluminum industry.
Alcoa's offer would create a company with a combined 20% of aluminum production. It also would bring two companies back together that were split up decades ago for antitrust issues, a concern Alcoa says it will allay by divesting itself of certain assets, most likely aluminum plate and other products for the aerospace industry.
Even so, the Jana letter said Alcoa "should immediately cease its ill-advised pursuit of Alcan and begin a review of all strategic alternatives to maximize shareholder value, including a sale of the company."
Rosenstein, Jana's managing partner, also questioned the timing and logic of Monday's announcement.
"We believe that the board has done its shareholders a disservice by carefully designing its offer so as not to require the approval of Alcoa's shareholders and announcing it only weeks after Alcoa's annual meeting of shareholders, where shareholders could have voiced their displeasure," he stated in the letter.
Jana has assets under management exceeding $7.5 billion and offices in New York and San Francisco.
In the past, Jana has teamed up with billionaire activist investor Carl Icahn. The duo leaned heavily on Time Warner Inc. and Kerr-McGee Corp. to return cash to shareholders and boost share prices. Also, Jana last year offered to buy Houston Exploration Co., but the company rejected the offer and this year rea
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