Alcoa urges Alcan to avoid delays in takeover play

Alcoa Inc. yesterday asked  Alcan Inc.'s board 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 Alcan or Alcoa or both, said Robert Mantse, senior vice-president of the 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 the 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 Qubec until a later date. We believe however it is in all parties' interests, including those of Qubec, for you to commence such consideration at this time," Belda wrote.

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 have been met.

That would include, according to a senior government official conversant 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 (CVRD) while Falconbridge was taken 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 that he believes delay will not deter a mammoth mining companies such as Rio Tinto PLC and BHP Billiton PLC that might be eying Alcan.

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

Alcan spokeswoman Anik Michaud said that 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 "fulfil the letter and sprit 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 shares closed at $90 on the Toronto Stock Exchange yesterday, up 69 cents.