Alcan bid prepared by Norsk Hydro

Takeover battle involving Montreal aluminum producer said to widen

By Robert Daniel
MarketWatch
May 28, 2007

TEL AVIV (MarketWatch) - Norsk Hydro, the Oslo energy, power and metals company, is preparing a more than $30 billion bid for Montreal aluminum producer Alcan Inc., the online edition of Canada's Globe and Mail reported on Monday.

The bid would compete with a $27 billion hostile bid for Alcan disclosed by Alcoa on May 7. And it would heat up and widen an already busy fray surrounding Alcan.

A number of companies have been mentioned as possible suitors for the Montreal aluminum producer.

And analysts have raised the prospect that Alcan could execute what's known as a Pac-Man defense, in which it turns around and bids for Alcoa, its bigger rival.

Alcan has rejected Alcoa's $73.25-a-share cash-and-stock proposal as inadequate and uncertain. The bid price was a 20% premium to Alcan's closing price at the close of the prior trading day.

Alcoa has said it acted after pursuing a friendly merger for two years. And it said on Wednesday that its bid price was "full and fair."

On Friday, Alcan said in a Securities and Exchange Commission filing that management and the board "have not foreclosed any options." Alcan said the board would consider a new Alcoa proposal "that made sense for our shareholders" but "certainly not under the currently proposed terms and price."

Alcan also has said it's in talks with third parties on its alternatives.

Norsk Hydro is owned 43% by the Norwegian government, and it can look for support to the government's $292 billion pension fund, which it built with North Sea oil revenue, the Globe and Mail reported. Norsk Hydro's current aluminum division accounts for 4% of world output of the metal, the paper reported.

Other mining giants, including Australia's BHP Billiton, are considering competing for control of Alcan, the Globe and Mail said. On Monday, shares of Rio Tinto and BHP Billiton were up in Sydney trading amid speculation that the mining groups could be preparing separate bids for Alcan.

The Sydney Morning Herald and the Age reported Monday that Rio Tinto, the world's No. 3 miner by sales, hired Deutsche Bank AG to advise it on a possible takeover bid for Alcan. A Rio Tinto spokesman declined to comment on the issue.

Last week, the Globe and Mail reported that BHP had initiated talks with Alcan. The bid is believed to be still in the early stages, or roughly on par with other companies that have made preliminary expressions of interest in the aluminum giant, the Sydney Morning Herald report said.

In addition to bids by Rio Tinto and BHP Billiton, Australian media reports said other potential suitors for Alcan also include Brazil's Co. Vale do Rio Doce, the U.K.'s Anglo American, of Switzerland and Russia's Rusal. The reports also said Chinese companies and private-equity groups could emerge as potential bidders.

Alcoa and Alcan together would have revenue of more than $54 billion and would easily hold the rank of the world's No. 1 aluminum producer.

End of Story

Robert Daniel is MarketWatch's Middle East bureau chief, based in Tel Aviv.