Alcan bidding £2.4bn for Pechiney

CANADIAN aluminium giant Alcan today launched a hostile e3.49bn (£2.40bn) takeover bid for French rival Pechiney - which immediately declared the move unwelcome.

Alcan is offering three of its own shares plus e123 in cash for every five Pechiney shares. There is a e41 a share cash alternative. At e41 a share the offer is at a 20.5% premium to the e34.02 close of Pechiney shares on Friday.

The offer comes only three years after a proposed friendly three-way merger between Alcan, Pechiney and Algroup of Switzerland was abandoned in the face of regulatory concerns.

It also comes only seven months after an Amsterdam court scuppered Pechiney's bid to acquire the aluminium assets of Anglo-Dutch steel group Corus.

Aluminium prices have been falling, and were down 8.4% last year according to Pechiney. Profitability in the industry has been poor. During 2002 Pechiney made a net loss of e50m on revenues of e11.9bn, and the consensus forecast this year is for a profit of only e65m. In January the group launched a fresh round of cost-cutting.

Alcan, however, made a financial turnaround during 2002, achieving net profits of US$374m (£224m) on revenues of US$12.5bn, after losing $356m in 2001. The group ended the year with gearing of 31% and has since unveiled further profit improvement in the first quarter.

Today's bid came as a bolt from the blue for Pechiney executive chairman Jean-Pierre Rodier. Pechiney said there had been no discussions prior to the bid being announced.

However, Alcan, headed by Travis Engen, claims it can achieve efficiency savings of $250m a year from combining the two businesses. Engen described the deal as 'the best option for future growth' and as a 'win-win offer that maximises value for shareholders and stakeholders of both companies'.

The proposed takeover is sure to provoke close examination by competition authorities in both Europe and the US.

But Pechiney, a former French State company that was privatised more than a decade ago, can no longer rely upon the protection of its government or a so-called hard core of friendly shareholders to save it from Alcan.

The French State investment bank, Caisse des Depots, now has only 4.61% of Pechiney shares. State Street Bank and Trust has 9.96% of Pechiney, The Capital Group Companies 7.86%, Allianz 6.6%, Templeton Investment 6.54% and FMR/Fidelity 5.04%.

Corus shares in demand

TROUBLED steelmaker Corus was the heaviest traded stock among the second-liners with more than 77m shares changing hands as the price dipped 1p to 17 1/2p. Seven months ago an Amsterdam court scuppered Pechiney's bid to acquire Corus's aluminium assets.

A spokesman for the Anglo-Dutch steel group said there were now 'no active merger talks going on' between the two companies. Corus aluminium smelters and manufacturers are based in Holland and Germany.

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