3 Aluminum Companies in Merger Talks

Canada’s Alcan Aluminium, France’s Pechiney and Switzerland’s Algroup said they were in “advanced discussions” for a three-way merger that would create the world’s biggest aluminum company, with annual revenue of more than $24 billion, including non-aluminum businesses. Current leader Alcoa Inc. has $15.3 billion in annual revenue. The merger would “create an entity that has balance-sheet strength, product diversity and management strength,” said Vahid Fathi, analyst at ABN Amro. Alcan would be expected to remain the listed company for trading purposes, and its Montreal headquarters the seat of decision making. Trends favor aluminum industry consolidation and the pursuit of economies of scale. Aluminum prices have been under pressure because of weak demand, and customer industries such as auto makers are consolidating. A merger would need U.S. and European regulatory approval. Analysts expect approval, however, because the combined company would have strong competitors in each of its business segments.