Alcan Launches $3.87B Bid for Pechiney
PARIS (AP) _ Canada’s Alcan Inc. on Monday launched an unfriendly euro3.4 billion (US$3.87 billion) cash-and-share offer for French competitor Pechiney SA in a renewed attempt to create the world’s second largest aluminum producer after Alcoa Inc.
Including debt, Alcan’s offer values Pechiney at euro4.8 billion (US$5.46 billion), Alcan said.
Pechiney expressed its ``surprise at this unfriendly approach″ and said the offer sells the French company short.
The deal values Pechiney at euro41 (US$46.65) per share, a 39 percent premium over the company’s average share price in the past month, and a 21 percent premium over Friday’s closing price of euro34.02.
Alcan said it intends to pay 60 percent in cash and 40 percent in shares for Pechiney.
The Canadian company offers three Alcan shares and euro123 (US$139.97) in cash for every five Pechiney shares held, as its main offer.
Alcan’s bid also includes two subsidiary offers, one offering euro41 in cash per Pechiney share, and another offering three Alcan shares for every two Pechiney shares.
Pechiney quickly saw ``negative implications″ in the deal for which Alcan must secure at least 50 percent of Pechiney’s capital to complete. About 90 percent of Pechiney shares are publicly traded.
Despite Alcan’s willingness to dispose of some assets, ``It can’t be guaranteed the European Commission will accept Alcan’s proposals,″ Pechiney said. The outcome remains ``uncertain″ and has ``negative implications for the company, its employees and its shareholders,″ it added.
Alcan Chief Executive Officer Travis Engen, speaking at a news conference, said the euro41 per share offer ``is a fair price″ for Pechiney.
``We regard it (the offer) as friendly, but unsolicited,″ Engen said.
Engen conceded that among Pechiney’s options is recourse to a white knight, a third party.
``We know that Pechiney will examine its options. For instance, we could think of a white knight,″ Engen said.
Engen and Pechiney Chairman and Chief Executive Officer Jean-Pierre Rodier met July 4 and July 5, but the proposed deal was apparently not discussed.
``There have been no consultations between the two groups before Alcan’s decision to launch its proposal,″ a Pechiney statement said. It said the proposal ``seriously undervalues the strategic potential of the Pechiney Group.″
A previous merger attempt between the two companies and Switzerland’s Alusuisse-Lonza had been rejected by the European Commission’s regulatory authorities. Pechiney has continued since then as a stand-alone company, while Alcan and Alusuisse merged.
However, Alcan said Monday it is willing to make the disposal commitments that had forced the two companies to put an end to their plans in March 2000.
In particular, Alcan said it is prepared to sell either the AluNorf or Neuf-Brisach rolling mills in Germany, should the European Union require it.
Refusal to part with either of these two plants had been at the heart of the merger failure three years ago.
Alcan is also willing to dispose of a number of other activities to soothe competition concerns, including some packaging businesses.
Overall, the Canadian company estimates that the businesses raising competition issues represent 4 percent to 5 percent of the combined businesses’ annual revenue of euro24 billion (US$27.3 billion).
Alcan must obtain regulatory approval from the European and U.S. competition authorities, as well as from the French Treasury.
The Canadian company estimates that the transaction could be completed within three months, with the formal offer on the stock exchange being launched in the third quarter of 2003.
The deal would enhance the combined company’s earnings per share and earnings before interest, tax, depreciation and amortization, or EBITDA, Alcan said.
Annual cost savings of $250 million (euro219.6 million) should be generated by such a merger within two years after completion of the deal, it added.
Eds: Valerie Venck is a correspondent of Dow Jones Newswires. Benoit Faucon, also of Dow Jones, contributed.