May 15, 2007
Vol 2 | Num 20

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News to know

More consolidation possible for aluminum

Alcoa-Alcan merger could increase prices

Officials from the world’s second largest aluminum producer, Alcoa of Pittsburgh, announced May 7 the company planned to issue an unsolicited bid of almost $27 billion for rival Alcan Inc. of Montreal, the world’s third largest aluminum producer. 

In the bid, Alcoa officials said they would acquire all outstanding Alcan shares for $58.60 in cash, and 0.4108 of a share for each outstanding common share, according to a May 7 Alcan release. If successful, Alcoa would become, by far, the world’s largest aluminum producer, surpassing Rusal of Moscow. Rusal took the top spot in March after merging with Glencore International AG of Switzerland.

The deal would mark the third major consolidation in the North American aluminum industry in the last decade. In 1998, Alcoa acquired Alumax, buying more than 27.5 million shares of the Atlanta company for $50 a share. Two years later, Alcoa merged with Reynolds Metals Co. of Richmond, Va.

“There used to be Alumax, Reynolds, Alcoa, Alcan that you could buy from,” says Rod McDonald, director of supply chain for Traco in Cranberry Township, Pa. “The number of primary producers is becoming a lot smaller … this should be somewhat concerning to our industry.”

While McDonald says the potential Aloca-Alcan merger would not affect the global price of aluminum alloy, it could increase prices for processed materials, from billet to extrusions.

Mike Petersen, president of Petersen Aluminum Corp. in Elk Grove Village, Ill., says window manufacturers should prepare for cost increases if the deal goes through. “[The merger] is potentially a big deal,” he says.

While a merger could take up to several years, McDonald recommends industry executives look out for developments. “Obviously we should be paying attention,” he says.

This becomes particularly important, as the number of players could rapidly extend beyond just Alcoa and Alcan. Several publications, including the Financial Times, have reported in the past week that several other worldwide aluminum producers may enter the bidding for one or both of the companies. 

In a May 10 article, the Financial Times listed BHP Billiton, AngloAmerican and Rio Tinto, all of London, and Xstrata Plc. of Switzerland, as potential buyers.

Stay tuned to for daily updates.

—By Katy Devlin, e-newsletter editor, e-glass weekly


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