Alcan Launches Bid for France’s Pechiney

Canadian aluminum maker Alcan Inc. launched a hostile $3.9-billion bid for French rival Pechiney on Monday, reviving the key part of a mega-deal blocked by European competition authorities more than three years ago.

Montreal-based Alcan, the world’s second-largest aluminum maker, said it would offer 123 euros in cash and three new Alcan shares for every five Pechiney shares. That values the French company at $47.09 a share, or $3.9 billion, excluding $1.61 billion of debt.

The deal, if successful, would create the world’s leading aluminum firm by revenue. But Alcan would remain No. 2 after Pittsburgh-based Alcoa Inc. based on market value and primary aluminum production levels.

The unsolicited bid comes as depressed aluminum prices and a weak economy pushed companies toward consolidation to try to gain more clout with customers and whittle costs.

“I regard it as an industry that remains under quite severe pressure,” said Ian Henderson, resource fund manager at J.P. Morgan Fleming Asset Management. “I think the business combination makes a fair degree of sense.”

Pechiney’s U.S.-traded shares, which hit a six-month high last week on talk of a bid, surged $5.01 to $24.28, and Alcan fell 57 cents to $30.89, both on the New York Stock Exchange.

Analysts said the deal would boost Alcan’s presence in the aerospace and automobile markets and give it access to Pechiney’s leading aluminum smelting technology.

But Alcan must overcome competition concerns that led the European Commission to block a friendly three-way union among Alcan, Pechiney and Swiss aluminum and specialty packaging maker Alusuisse Group Ltd. in 1999. It also must convince Pechiney management and shareholders that the offer, a 21% premium to Pechiney’s Friday closing share price, is in their interests.

“Pechiney is astonished at the unfriendly nature of this process,” Pechiney said. “The offer very significantly undervalues the economic and strategic worth of Pechiney.”

Analysts said Alcan may yet face competing bids.