Alcoa asks Alcan to look at power deal

Alcoa Inc. asked Alcan Inc.'s board yesterday not to delay its consideration of whether Alcoa meets the terms set out in an energy deal between Alcan and the Quebec government.

Any delay that Alcoa faces in getting its deal done increases the odds of another company moving in and attempting to take over Alcan or Alcoa or both, said Robert Mantse, senior vice-president of bond rating firm DBRS.

"The more time you give other players to look at the deal, to figure it out," the greater the risk, Mantse said from Toronto.

In a letter to Alcan's board of directors, Alcoa CEO Alain Belda wrote: "We understand that the continuity agreement permits you to defer consideration of our proposals for Quebec until a later date. We believe, however, it is in all parties' interests, including those of Quebec, for you to commence such consideration at this time." According to the fine print of the 10-page Alcan-Quebec pact, Alcan's board may choose not to begin that consideration until the requirements of all regulatory bodies and authorities examining an Alcan takeover or acquisition have been met.

That would include, according to a senior government official familiar with the deal, requirements made by anti-trust authorities in Canada, the U.S., the European Union and elsewhere.

"Everyone is watching everyone else, but not everyone has a full process in place (yet)," said Mantse, who is among the analysts who believe that Alcan could execute a "Pac-Man defence" and go after Alcoa.

Mantse noted that when Inco Ltd. and Falconbridge Ltd. tried to merge, both companies were put into play. And that friendly merger was held up by EU regulators long enough for other companies to come into the matrix. Inco eventually went to Companhia Vale do Rio Doce, while Falconbridge was taken over by Xstrata PLC.

Other observers contend that time is not a huge factor in the Alcoa bid.

A Toronto-based analyst, who asked not to be identified, said he believes delay will not deter a potential suitor.

Mammoth mining companies - such as Rio Tinto PLC and BHP Billiton PLC - that might be eying Alcan don't have to show their hands now.

"They will wait until the last minute to make their move and it doesn't matter" when that occurs, the analyst said.

Alcan's Anik Michaud said Belda's letter was received and "consideration of the letter will follow due process." Alcan has until Tuesday to respond formally to Alcoa's cash and stock bid, worth an estimated $33 billion U.S.

In his letter to Alcan board chairman Yves Fortier, Belda said that Alcoa firmly believes that its proposals "fulfill 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." Alcan's shares closed at $90 on the Toronto Stock Exchange yesterday, up 69 cents.

Under the offer, Montreal would become the combined firm'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.