Canadian aluminum maker Alcan Inc. on Tuesday urged its shareholders to reject a hostile $27 billion takeover bid by U.S.-based rival Alcoa Inc., saying the offer failed to reflect the company's value.
Yves Fortier, chairman of Alcan's board of directors, said in a statement that the board had thoroughly evaluated Alcoa's offer and concluded it was not in the best interests of Alcan shareholders.
"It does not adequately reflect the value of Alcan's extremely attractive assets, strategic capabilities and growth prospects, does not offer an appropriate premium for control of Alcan, and is highly conditional and uncertain," he said.
Fortier said the companies have "fundamentally different approaches and track records in creating shareholder value."
Alcoa launched its cash and stock bid for Montreal-based Alcan earlier this month, after almost two years of private talks failed to produce a negotiated agreement.
Alcoa spokesman Kevin Lowery said his company, based in Pittsburgh with executive offices in New York, was reviewing Alcan's lengthy response, which was filed with regulators.
"We continue to believe that our offer is full, fair and provides attractive value to Alcan shareholders," he said.
Dick Evans, Alcan's president and chief executive officer, said the company had remained disciplined in talks with Alcoa, insisting on safeguards for shareholders before engaging in substantive negotiations.
"Despite two years of approaches by Alcoa, at no time was Alcan presented a compelling proposal — either in terms of economics, structure or conditionality — that was in the best interests of our shareholders," he said.
Among the reasons for the board's decision, Alcan said, was that the Alcoa offer failed to compensate shareholders enough for Alcan's asset base, technology, strategic capabilities and growth prospects.
The offer also represented a discount to the trading price of Alcan shares, with a total value that will vary with the trading price, the company said.
A financial adviser said in a report to the Alcan board that Alcoa's proposal was financially inadequate for shareholders, according to the company. It said its financial advisers on the offer included Morgan Stanley and UBS.
Charles Bradford, an industry analyst with Bradford Research/Soliel Securities in New York, said Alcan's response came as little surprise and was part of a pattern common to similar deals.
"It's a little like a mating dance, and the whole idea is to eventually get a better price," he said.
Carol Levenson, director of research at the corporate bond research firm Gimme Credit, said in a research note that Alcan was unlikely to go quietly.
While a stronger bidder is possible, "we think the company is more likely to attempt to remain independent through some 'self-help' leveraging action that would reward shareholders and make it less attractive to a foreign buyer," she wrote.
Alcoa founded Alcan in 1902, split it off as a separate company in 1928, and retained largely common ownership until 1951 when major shareholdings were divested by U.S. court order because of antitrust issues.
The combined company would have 188,000 employees in 67 countries.
Until recently, both companies were the world's top two producers of aluminum, but they both now lag behind Rusal of Moscow. The Alcan deal would push Alcoa beyond Rusal in aluminum production.
Alcoa shares rose 70 cents to $39.65 in after hours trading, while Alcan shares gained $2.18 to $83.21.
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