The Cable Directory

Alcoa said on Monday it would make a hostile bid for Canada’s Alcan Inc. for nearly $27 billion, after talks between the aluminium rivals failed to lead to a deal. If successful, the bid of $73.25 per share in cash and stock would create the world’s largest producer of the metal that is used for products ranging from beverage cans to airplanes, cars and heavy machinery parts.

Alcan said it plans to consider the proposal and advised shareholder to wait until it has fully reviewed the offer. Shares of both companies rose on the news. Alcan is seeing “very strong’’ demand from the cable and electric-conductor markets as industrial users substitute the metal for copper, Alcan’s Chief Executive Officer Richard Evans said in January. Copper prices have surged more than fivefold in the past four years on the London Metal Exchange while aluminium has doubled. Copper closed yesterday at $8,010 a metric ton, more than twice the $2,863 price for aluminium.

An Alcoa-Alcan combination would put its production capacity well above that of Russian rival United Company RUSAL, which was formed from the link-up of RUSAL, Russian SUAL, and assets of Swiss-based Glencore International. Given the size of the two North American companies, a deal is expected to draw scrutiny from regulators, and Alcoa said it was prepared to sell off assets to win approval. Alcoa said its move comes after nearly two years of merger discussions between the companies that failed to a yield an agreement. It put the enterprise value of the deal at $33 billion, including $6 billion in debt.

Alcan and Alcoa repeatedly have been the subjects of takeover speculation amid consolidation in the mining industry. A rally in metal prices left mining companies flush with cash, and global mining mergers topped $188 billion in 2006.

Ever since Dick Evans became the eighth president and CEO of Alcan Inc. in March, 2006, he has insisted the Canadian metals giant is not interested in a friendly merger with a larger mining company.

The Oregon native has stuck to his guns, maintaining that Alcan has all of the scale it needs to operate globally. “We don’t see a big need, nor do we see big synergies in being part of a larger, more diversified group,” Mr. Evans said in a March interview with The Globe & Mail. Despite his repeated assertions, Alcan might soon become the latest Canadian company to be swallowed up by a foreign owner.

Mr. Belda tells Alcan CEO Dick Evans that the industry is rapidly changing and that this is a transaction “we must pursue.”

“Last fall we worked together to reach a mutually acceptable merger transaction, and I am disappointed our conversations did not lead to an Alcoa-Alcan combination,” Belda wrote in a letter to Mr. Evans Monday.

“The significant financial benefits of that combination, together with the rapidly changing competitive profile of our increasingly global industry, made it compelling that we explore such a transaction.”

Mr. Belda who’s spent almost four decades at Alcoa now faces threats from other quarters. Global demand is boosting aluminium prices, leading to a wave of consolidation in the industry.

OAO Russian Aluminium combined with smaller Russian rival OAO Sual Group and the assets of Swiss-based Glencore International AG in March, usurping Alcoa’s position as the world’s largest aluminium producer. The new company will produce one-eighth of the world’s aluminium and is expected to be floated on the markets within three years.

Mr. Belda embodies Alcoa’s global scale and ambition. He was born in French Morocco to a Portuguese mother and Spanish father, and spent his childhood in Morocco, Brazil and Montreal. He’s fluent in five languages.

Estado de S. Paulo, a Brazilian newspaper, reported March 1 that Rio de Janeiro-based Cia. Vale do Rio Doce, the world’s largest iron-ore producer, may make a takeover bid for Alcan. The newspaper didn’t cite its sources. Evans said in a March 12 interview with Canada’s Business News Network that he wouldn’t welcome a Vale takeover because the two companies operations aren’t compatible.

Shares of Alcoa surged 6.4 percent on Feb. 13, the biggest gain in 10 months, after the Times of London said BHP Billiton Ltd. and Rio Tinto Group were planning takeover bids, citing people the newspaper didn’t identify. Alcoa and Rio Tinto wouldn’t comment, and BHP denied the report.

Alcan also said it’s “optimistic’’ it can overcome local opposition in Hafnarfjordur, Iceland, to the company’s proposed smelter expansion that will more than double output at the plant to 460,000 tons from 180,000 tons.

A plebiscite in Hafnarfjordur last month showed 50.3 percent of voters were against the plan for environmental and social reasons. Evans said today in an interview that the project will be delayed at least six to nine months and that the company won’t proceed with the project if it can’t secure local support.

Alcan, led by Chief Executive Officer Richard Evans, plans to spend $1.8 billion in Quebec to add as much as 450,000 metric tons of smelting capacity after the Canadian province offered tax and power incentives. The company also is building a $2.7 billion smelter in Coega, South Africa, that will be able to produce about 720,000 tons of aluminium.