July 12, 2007
Rio Tinto Steps-up
Rio Tinto and Alcan today announced an offer by Rio Tintio to acquire all of Alcan’s outstanding common shares for US$101 per common share in a recommended, all cash transaction. The offer values Alcan's equity at approximately US$38.1 billion, and represents a 32.8% premium to the value of Alcoa’s current offer of U.S.$76.03, based on Alcoa’s closing share price on 11 July 2007. Some commentators still expect Alcoa to continue bidding for Alcan as it has few other viable options for acquisitions in this industry. This is particularly true since Alcoa itself is a rumoured acquisition target and a failed bid for Alcan makes it more vulnerable, although given that Alcoa is organized in Pennsylvania it is still about as bullet-proof against a hostile takeover as you can get.
Rio Tinto and Alcan have entered into a support agreement in connection with the transaction which provides for a break fee of U.S.$1.049 billion payable to Rio Tinto in certain circumstances. The minimum condition on the offer will be tenders of 66 2/3 percent of the outstanding shares and there is no financing condition on the bid. Rio Tinto is also going to some lengths to assuage the cultural concerns of Alcan (always an important and underlooked feature of M&A). In addition to headquartering the combined aluminium product group in Montréal, Rio Tinto will relocate its aluminium smelting technology research and development headquarters to Québec.
And for those who follow such things, Rio Tinto is being advised by Linklaters LLP and McCarthy Tétrault LLP. Legal counsel for Alcan was Ogilvy Renault LLP and Sullivan & Cromwell LLP. Interestingly, it appears that Linklaters is providing U.S. legal advice for Rio Tinto, a bit of a coup for the U.S. lawyers at this English firm, many of whom are refugees from Shearman & Sterling.
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