Metal Stocks: The Merger of the Aluminum Giants Unlikely...
By Ian L. Cooper
Multi-billion dollar buyouts are a dime a dozen with no let up in sight.
We’re only five months into the 2007 and worldwide LBO activity is about to cross $2 trillion. At this pace, we could easily pass last year’s record of $3.8 trillion. Think about this. If dealmakers felt there was something fundamentally flawed in the market, we wouldn’t see the bid intensity we’ve been seeing.
Making M&A headlines of its own, Alcoa just made a hostile bid for Alcan for $73.25 in cash and stock ($58.60 in cash and 0.4108 per Alcoa common share for each Alcan share), or $27 billion, after the two companies failed to produce a mutually agreed upon deal. That’s a 20% premium to Alcan’s all-time high on May 4, 2007.
Two reasons why the deal may not happen – one, Alcan may not be interested. And two, it would still be subject to review by the U.S., Canada, the EU, Australia, and Brazil. That’s in addition to foreign investment clearance from Canada, France, and Australia. Canada, for one, may not agree on concerns that it could lose “economic identity.” Plus, given the size of the two companies (Alcan is a $29 billion company; Alcoa is a $32 billion company), the deal is subject to further scrutiny.
Despite those hurdles, Alcoa (a possible victim of wishful thinking) believes the merger will happen. Should it, the deal could create a cost savings of about a billion dollars a year, according to reports.
Stay tuned,
Ian L. Cooper, Editor, Early Alert Trader
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