Alcoa stands by original offer to Alcan

SAN FRANCISCO -- Alcoa, Inc. said late Wednesday that it is standing by its original $27 billion offer to acquire rival aluminum producer Alcan, Inc., calling it "full and fair" and dismissing Alcan concerns that anti-trust hurdles could drag out the merger.

"We have studied Alcan's response and have not seen anything that would lead us to reevaluate our offer," said Alain Belda, chief executive of Alcoa , in a statement.

He said the company has already started to meet with a "significant" number of Alcan's shareholders and they supported the combination.

Late Tuesday, the board of Alcan urged shareholders to reject Alcoa's hostile offer on the grounds that it was too low and completion of the merger was too uncertain due to regulatory hurdles. Analysts had speculated Alcoa might respond with a higher offer.

The existing deal calls for a swap of $58.60 a share in cash and 0.4108 Alcoa share for each Alcan share, amounting to $73.25 a share as of the May 7 announcement and $74.60 as of the close of trading Tuesday. The original offer represented a 20% premium to the prior day's trading price.

Alcoa said it has already started talk to anti-trust authorities, including those in the United States, Canada and Europe, and that it is developing formal submissions.

"We have an aggressive, well-developed plan that recognizes and eliminates potential competitive overlaps," Belda said. The company said it is ready to make the necessary divestitures to get anti-trust clearance.

Alcoa said its offer expires on July 10 and cannot be amended to end before that time.

Alcoa shares had risen 3.7% on Wednesday, to $40.37, and edged up to $40.50 in after-hours trading. Alcan's U.S.-listed shares had risen 6% to $85.89 and slipped to $85.88 after hours.

Alcan shares have outpaced the offer price as investors bet Alcoa or another suitor would come out with a richer package to seal the deal.

In its notice to shareholders Tuesday, Montreal-based Alcan also told shareholders it was holding "ongoing discussions with third parties," on alternatives. See story on Alcan's rejection.

If Alcoa were successful, the new company would have $54 billion in revenues and a lock on the ranking of world's largest producer of aluminum and alumina. Alcoa would also gain Alcan's access to cheap hydroelectric power, though Alcan's access to some of that power would be jeopardized if Alcoa were to complete the deal without a sign-off from the board.

The combined heft would give the new Alcoa an edge over burgeoning rivals in China and Russia -- and perhaps protect Alcoa from being the target of a larger company or even the smaller Alcan, say analysts.

One of the parties talking to Alcan may be Australian mining giant BHP Billiton , which Toronto's Globe and Mail reported Wednesday was in early-stage talks with Alcan. See full story.

Other potential suitors could include Swiss diversified miner Xstrata Plc , Britain-based mining firms Anglo-American Plc  and Rio Tinto , and Brazil's Companhia Vale do Rio Doce , said Desjardins Securities.