May 22 -- Alcan Inc., Canada's biggest aluminum producer, urged shareholders to reject a $27.4 billion bid from Alcoa Inc. and said the board of directors has held talks with other potential suitors.
The $74.60-a-share offer doesn't ``adequately reflect the value'' for Montreal-based Alcan or ``offer an appropriate premium for control,'' Chairman Yves Fortier said today in a filing. ``Alcan and Alcoa have fundamentally different approaches and track records in creating shareholder value.''
Alcoa proposed the biggest metals-industry takeover this month as it loses market share to Chinese producers. Analysts said completing the acquisition may protect Alcoa from becoming a takeover target. Alcan shares have jumped 33 percent since the May 7 bid, topping the offer from New York-based Alcoa. Both companies gained in after-hours trading.
``To get this done, Alcoa is going to need to sweeten its bid,'' Leo Larkin, a metals analyst at Standard & Poor's in New York, said in an interview before today's announcement. ``Alcoa is going to do whatever it takes to get this deal done.''
Alcan rose to $83.20 at 5:57 p.m. in New York, up 2.7 percent from the day's close of $81.03. Alcoa's proposal called for exchanging each Alcan share for $58.60 in cash and 0.4108 of an Alcoa share. Alcoa rose to $40.01 in after-hours trading, up from today's close of $38.95.
On the Offensive
``We are in discussions with third parties,'' Alcan Chief Executive Officer Richard Evans said in a phone interview. ``We prefer an offensive strategy to a defensive strategy and are seeking alternatives that create shareholder value.''
Evans declined to rule out a possible bid for Alcoa. Alcan will ``consider all options,'' he said.
``We are currently reviewing Alcan's response, however, we continue to believe our offer is full and fair and provides attractive value to Alcan shareholders,'' Alcoa spokesman Kevin Lowery said.
Alcoa, which had been the world's largest aluminum producer until United Company Rusal of Russia completed a three-way merger in March, made its bid for Alcan after two years of talks failed to lead to a so-called merger of equals. Alcan broke off talks in December, after Evans had preliminarily agreed to be chief executive of the combined company and Alcoa's Alain Belda would be executive chairman, Alcoa said in a regulatory filing.
Alcan said Alcoa's version of events as detailed in its May 7 filing was ``accurate, but incomplete,'' and that Belda had indicated Oct. 27 that the company might pursue a hostile bid for Alcan.
Willing to `Re-Engage'
``Our mission in the near term is to look at all the alternatives,'' Evans said. ``If we thought it was productive, we would re-engage with Alcoa, but not on the terms and conditions of their May 7 offer.'' He declined to identify the companies with which the company has held talks.
Canadian politicians have questioned whether the deal should be allowed, citing $156 billion of announced foreign takeovers of Canadian companies in the last 18 months.
``Alcan is even more of a national icon in Canada than Alcoa is in the U.S.,'' said Tim Ghriskey, who manages about $1 billion as chief investment officer at Solaris Asset Management LLC in Bedford Hills, New York. ``The backlash could make this a very difficult deal to get done.''
More Takeovers
The boom in commodities helped fuel mergers and takeovers in the metals and mining industry, and a takeover of Alcan would be the largest yet. Lawmakers in the province of Quebec have demanded a review into whether the country should allow the bid.
Alcoa met Canadian politicians before announcing its unsolicited bid to win government backing for the deal.
The new company would have dual headquarters in New York and Montreal and base its primary metal business in Montreal. Cheap power rates and water rights granted by Quebec depend on Alcan continuing to have a significant presence in the province,
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