Melbourne: Anglo-Australian miner Rio Tinto offered $38.1 billion (Rs1,52,400 crore) for Canada’s Alcan, trumping US rival Alcoa’s earlier offer by 32.8%. The deal, if it goes through, would create the world’s largest aluminium company.
As consolidation in the booming metals sector continues, Rio Tinto and Alcan said in a joint statement that the combined entity would be named Rio Tinto Alcan and based in Montreal.
“Alcan’s board of directors unanimously recommends acceptance of the offer,” the statement said, noting the 101 dollar a share offer was 32.8% higher than Alcoa’s offer and 65.5% higher than Alcan’s record closing price.
The all-cash offer, one of the largest-ever acquisitions in mining history, appears designed to get in ahead of BHP Billiton, the world’s biggest miner who many believe could yet throw its hat into the ring for Alcan, analysts said.
It is expected to increase pressure on Alcoa and BHP Billiton to enter the race to consolidate and gain scale in order to take full advantage of record metals prices fuelled by unprecedented demand from China.
“It’s all about the China story, then watch India. The three metals that you can associate with the Chinese economic growth are steel, copper and aluminum,” Rio Tinto chief executive Tom Albanese told reporters.
“It will be value accretive for our shareholders in the first year and there will certainly be benefits for the host countries, in Canada, Australia and France.”
Rio Tinto said Alcan was an excellent fit with its operations, estimating the merger would generate savings synergies worth $600 million a year.
“We believe that Alcan, with its proven operating expertise and unique set of competitively positioned aluminium assets and power sources, will be an excellent complement to our existing diversified portfolio,” chairman Paul Skinner said.
The new Montreal-based entity will be the world’s top aluminium producer ahead of Russia’s United Company RUSAL and Alcoa, and will be led by current Alcan chief executive Dick Evans.
“With an attractive cost position bolstered by a strong technology portfolio, complementary refining and smelting assets, and a strong growth pipeline, the combination of Rio Tinto and Alcan will create a new global leader in the aluminium industry,” Evans said.
Alcan and Rio Tinto said they had agreed on a $1.049 billion “break fee” if the deal fell through, to be paid by either party under certain circumstances.
Alcan chairman Yves Fortier said the board had conducted a thorough evaluation of Rio Tinto’s offer, as well as competing bids, and that it offered “Alcan shareholders the certainty of a clear path to completion.”
The companies said they would focus firmly on mining and metals activities by selling Alcan’s packaging division.
“The increased overall size of Rio Tinto following the transaction will provide the opportunity for a strategic review of all Rio Tinto assets focusing on those which lack the long term competitive position to belong in the larger group,” the mining giant said.