Alcan To Alcoa: I Want To Be Alone

Like a stubborn suitor, Alcoa has doggedly pursued rival aluminum maker Alcan for two years now. But, on Tuesday afternoon, the Alcan announced that it has not been wooed..

Alcan rejected a $27 billion unsolicited takeover offer from Alcoa, arguing that the offer is contrary to the best interests of its shareholders. In a statement, Alcan Chief Executive Officer Yves Fortier said that the offer didn't adequately reflect the value of Alcan's assets, strategic capabilities and growth prospects.

"We are convinced that the proposed Alcoa-led acquisition of Alcan is not the right choice for our shareholders," Fortier said.

Those investors seemed to agree. On Tuesday, after the markets closed, shares of Alcan quickly climbed 2.4%, or $1.97, to $83. Shares of Alcoa increased 0.9%, or 36 cents, to $39.31.

Given all the aggressive action in the hot metals market, Alcan might have figured that a higher bid could be coming. Metal miners and producers have been buying each other up to benefit from economies of scale. Just a couple weeks ago, Norilsk Nickel battled it out with Xstrata to win Canadian miner LionOre. And it's been reported that BHP Billiton and Rio Tinto were eyeing Alcan themselves last year.

Why all the interest in Alcan? Analysts have pointed out that the company's low-cost power assets, and therefore low-cost smelting system, coupled with impressive free cash flow, makes it an attractive target for industry players.

Alcan actually began as a subsidiary of Alcoa, which divested the Canadian unit in 1928. In 2000, Alcan merged with Alusuisse and Pechiney. That merger almost did make Alcan the biggest aluminum producer in the world. But Alcoa retained its title as lead producer by snatching up Reynolds Metals.