M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Monday, May 7, 2007

Alcoa's Canadian Bear Hug

Alcoa today announced that it had delivered a letter from its CEO to the CEO of Alcan, the Canadian aluminum company, notifying it that Alcoa intended to offer to acquire all of the outstanding common shares of Alcan Inc. for US$58.60 in cash and 0.4108 of a share of Alcoa common stock per Alcan share in a transaction valued at $33 billion.  Alcoa expects to commence its offer tomorrow.  alcan's response is here.  Alcoa, with a market capitalization of approximately $34 billion is roughly the same size as Alcan.  The bid comes after two years of fruitless talks reports Marketwatch.  In a boon to the French Canadians, Alcoa announced that the combined company will have dual head offices in Montréal (where Alcan is currently headquartered) and New York. Montréal would also be the headquarters for Alcoa's global primary products business.  Alcoa stated that they did not expect any major antitrust impediment to the transaction, but did expect to have to make asset dispositions to satisfy regulators.

The bid comes on the heels of a prior major consolidation in the aluminum industry in March when the Russian aluminum producers RUSAL and SUAL joined and acquired Glencore’s alumina assets to become United Company RUSAL, the world’s largest aluminum producer.   Alcoa's measure could also be viewed as a takeover defense maneuver against rumors that Alcoa itself would be acquired by a consortium of BHP Billiton and Rio Tinto.

Alcan is listed on the Toronto Stock Exchange and the New York Stock Exchange.  The bid will be governed by both U.S. and Canadian law.  Notably, the bid will be governed by the Quebec securities regulator and the Quebec Securities Act.  The laws on takeover defenses under Quebec law are different than the United States.  Alcan has a poison pill, and though these are permitted under Canadian law, the Canadian securities commissions have been willing to force companies to terminate their poison pill if the activities of the board of directors of the target company to improve the bid or to develop other alternatives have reached a point where they are simply denying shareholders the opportunity to accept the bid. In prior cases, this period has been in the range of 35 to 50 days.  But, these cases largely arise from Ontario, not Quebec.  Given the prominence of Alcan in Quebec and traditional nationalism among the French Canadians and indeed Canadians themselves, it will be interesting to see if the Quebec Securities Commission is as quick to act if Alcan decides to resist the bid (For more on Canadian nationalism and the deal see the Deal Book post here). 


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can you tell me how common the takeover defense that alcan has is in canada and offer any comment on its (potential) effectiveness? also, are there any particular aspects of takeover law in quebec that should be considered notable in this case//would help alcan? many thanks indeed

Posted by: dale crofts | May 14, 2007 10:59:05 AM

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