We can live with Alcan/Quebec deal: Alcoa

An energy and water-rights deal between Alcan Inc. and the Quebec government doesn't stand in the way of Alcoa Inc.'s $33-billion (U.S.) bid to take over the Montreal-based aluminum producer, a spokesman for the U.S. firm said yesterday.

"After an initial reading, we believe our plans meet (Quebec's) conditions," Alcoa's Kevin Lowry said.

Economic Development Minister Raymond Bachand yesterday unveiled the 10-page contract signed last December, a day before Alcan announced its $1.8- billion (U.S.) expansion project in the Saguenay and a month before it announced the $50-million (U.S.) expansion of its Montreal headquarters.

Simply put, the 10-page document requires that Alcan, or any corporate acquisitor of Alcan, maintain the same multi-faceted economic and social footprint in Quebec as Alcan has promised, or lose an interest-free loan along with the far more valuable water and electricity rights.

"We have already agreed to the commitments in the announcement we made on Monday," Lowery said from Pittsburgh, where Alcoa is incorporated.

At a Montreal press conference, Alcoa CEO Alain Belda pledged that the new combined company would have dual headquarters in New York and Montreal, with "strategic management functions" in each city.

The firm's key aluminum-and-primary-metals business would be rooted in Montreal.

And, the combined company would continue Alcan's Saguenay expansion, along with Alcoa's own expansion plans, Belda said. And some Alcoa research-and-development work would come to Quebec.

In return for Alcan's Saguenay investment - including a prototype smelter - Quebec provided a $400-million interest-free loan over 30 years, a new block of 225 megawatts of electricity to be supplied by Hydro-Quebec at a special industrial rate from 2010 to 2045, extension of two other low-cost Hydro-Quebec contracts until 2045 along with an extension of Alcan's water rights on the Peribonka River from 2034 to 2058.

The deal, which some observers had characterized as a possible "poison pill" against takeover bids for Alcan, included a confidentiality clause.

Yesterday, Bachand said that Alcan agreed to make the document public "because it was in Quebecers' public interest" and that it would reassure Alcan workers in Quebec.

The "tightly bound agreement" was crafted on the recommendation of Bachand, whose life before politics was in the world of mergers and acquisitions, reporters were told.

Barring extraordinary circumstances, the pact requires that Alcan or an acquisitor maintain a "financially and strategically important" headquarters in Quebec "essentially similar" to the current one.

It requires continued economic development, environmental protection as well as maintenance of " policies, practices" and fiscal commitments related to community, educational, cultural and charitable undertakings. It also contains a sort of morals clause, "good behaviour, good reputation"

Bachand said the guarantees Quebec got, pegged to electricity sold at Hydro-Quebec's industrial L rate, will ensure both head office and production jobs are safe for 35 years.

During a presentation in Dublin, Belda - who had yet to see details of Quebec pact - described Alcan's hydroelectric assets in Canada, in Quebec and B.C., as one of the company's key attributes.

Electricity accounts for up to 40 per cent of the costs in aluminum production.

About 54 per cent of a combined Alcoa/Alcan's power supply would be from renewable hydro, Belda said in Dublin.

Former prime minister Brian Mulroney said yesterday that hostile takeovers - like the bid by U.S.-based Alcoa for Montreal-based Alcan - are part of globalization. Mulroney made his comments while attending Quebecor Inc.'s annual meeting.