By Lisa Kerner
Charlotte, N.C., July 12 - Rio Tinto offered to buy all of Alcan Inc.'s outstanding shares for $101 per share in an all-cash transaction valued at $38.1 billion. Alcan's board of directors approved the deal, expected to close in the fourth quarter of 2007. The per-share price is a 65.5% premium to Alcan's highest closing share price of $61.03 on May 4, a company news release stated.
As a result, Alcoa withdrew its offer for Alcan and reinstituted its 87 million share repurchase program that had been on hold while the offer for Alcan was open. As previously reported, Alcan rejected the New York-based aluminum manufacturer's offer to acquire the company in a cash and stock deal valued at $33 billion.
"Rio's offer for Alcan strongly reinforces our view of the underlying value in the aluminum industry and its bright prospects for the future," Alcoa chairman and chief executive officer Alain Belda said in a company statement. "However, at this price level, we have more attractive options for delivering additional value to shareholders."
Rio Tinto's support agreement with Alcan includes a $1.049 billion break-up fee, plus expenses up to $200 million. The company also agreed to meet Alcan's terms of its continuity agreement with the government of Quebec.
The offer is conditioned on the valid acceptances of not less than 66 2/3% of Alcan shares on a fully diluted basis and the approval of Rio Tinto shareholders.
Rio Tinto said it will finance the acquisition through newly committed bank facilities underwritten by The Royal Bank of Scotland, Deutsche Bank, Credit Suisse, and Societe Generale.
Post-tax synergies from the transaction are expected to be around $600 million per year.
Rio Tinto expects Alcan's current executive team to play a role in the combined aluminum business, which will be known as Rio Tinto Alcan, as well as in the Rio Tinto Group. Alcan chief executive officer Dick Evans will be the CEO of Rio Tinto Alcan based in Montreal.
In addition, Rio Tinto will add two non-executive members of the Alcan board and Evans to its expanded board of 16 members.
"The agreed transaction with Rio Tinto is the outcome of a rigorous and thorough process conducted by the Alcan board," Alcan chairman Yves Fortier said in the release.
"It achieves all of our stated goals, providing clearly superior value to Alcan shareholders while remaining true to our core values and obligations as responsible corporate citizens."
Montreal-based Alcan is a materials company specializing in bauxite mining, alumina processing, primary metal smelting, power generation, aluminum fabrication, engineered solutions and specialty packaging.
Rio Tinto is an international mining group based in the United Kingdom.
| Acquirer: | Rio Tinto
|
| Target: | Alcan Inc.
|
| Transaction total: | $38.1 billion
|
| Price per share: | $101
|
| Termination fee: | $1.049 billion
|
| Announcement date: | July 12
|
| Expected closing: | Fourth quarter
|
| Stock price for target: | NYSE: AL; $89.60 on July 11
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