Alcoa tells Alcan board its offer more than honours deal with Quebec

MONTREAL - Alcoa's hostile bid for Alcan Inc. (TSX:AL) exceeds the requirements of an agreement concluded between the Canadian aluminum giant and the Quebec government, the U.S. company said Thursday.

In a letter sent to Alcan's board of directors, Alcoa CEO Alain Belda said the union of the two metal producers will enhance Quebec's position in the world aluminum industry.

"We firmly believe that our proposals fulfil the letter and spirit of the continuity agreement, and that no one else can match the benefits we offer to Alcan's stakeholders in this and many other respects," said the letter sent to board chairman Yves Fortier.

The missive was sent days after the American company began to run full-page ads in several newspapers within and outside Quebec vaunting the offer's benefits.

"We want to make sure people understand that we are committed to the commitments that we have made and that we think this is in the best interests of all the stakeholders in the region," Alcoa spokesman Kevin Lowery said in an interview.

"All it is the continuing and re-echoing of the points we want people to understand that we are committed to Quebec."

The letter also comes as some analysts have suggested Alcan could execute a "Pac-Man defence" to purchase Alcoa.

Alcan spokeswoman Anik Michaud wouldn't respond to that theory or specific claims made in the letter.

"Consideration of the letter will follow due process," she said in an interview.

Alcan plans to formally respond to Alcoa's offer by Tuesday.

Last week, Quebec Economic Development Minister Raymond Bachand released details of its deal with Alcan and insisted that any purchaser of the company must honour its terms in terms of employment and the location of the headquarters.

In exchange for Alcan's investment in a prototype smelter at Saguenay, Quebec has provided a $400-million interest-free loan along with water and energy rights.

Alcoa said there is no reasonable basis to believe that Alcan's positive commitment to the health and prospects of the Quebec economy of society will be diminished by a change in ownership.

The Pittsburgh, Pa.-based company has committed to assuming all of Alcan's existing obligations and commitments, including to Quebec and any unions.

"Moreover, once the combination is completed we have no intention of modifying those obligations or commitments in any manner otherwise than in accordance with and subject to the terms of the continuity agreement where it is applicable," Alcoa said in a news release.

The letter's contents mirror the company's position outlined earlier this month when it launched a hostile US$33 billion offer for Alcan after failing to reach a negotiated deal in almost two years of private talks.

However, it is much more detailed and comes after Alcoa's lawyers were able to review details of the continuity agreement, said Lowery.

Under the offer, Montreal would become the combined company's global headquarters for primary products as well as for related research and development.

The primary products business would be the largest aluminum company in the world and rank among the largest businesses in Canada.

The new company's dual headquarters will be in Montreal and New York, with selected strategic management functions located in each city.

Alcoa intends to have one-third of its board seats occupied by Canadians.

Alcan shares closed up 69 cents to close at $90 Thursday on the Toronto Stock Exchange. They have gained more than $21 or 31.6 per cent since Alcoa's launched its takeover bid.