Analysts on Tuesday said they believe a higher bid could emerge for Alcan Inc., following an unsolicited $27 billion bid from Alcoa Inc. for the Canadian aluminium maker.
Alcan shares rose 34.5 percent to close at $82.11 Monday, though the shares gave up 42 cents to $81.69 in premarket electronic trading Tuesday.
Banc of America Securities analyst Kuni M. Chen in a client note cut the rating on Alcan to "Neutral" from "Buy," citing the run-up and saying it is likely that other bidders will emerge, but will not push the stock price much higher. Chen raised the price target on Alcan to $86 from $62.
Meanwhile, Alcan's free cash flow generation, good execution, and strong industry potential could boost the stock price, wrote Chen.
RBC Capital Markets analyst H. Fraser Phillips in a client note lifted his target price on Alcan to $85 from $63.
"We believe that Alcan's low cost power assets, and hence low cost smelting system, along with its strong free cash flow, could make it an attractive target for other industry players," he wrote.
In a separate client note, Phillips lifted his rating on Alcoa to "Sector Perform" from "Underperform" and lifted his target price to $40 from $37.
Davenport & Co. analyst Lloyd T. O'Carroll cut his rating on Alcan to "Neutral" from "Buy," citing the run-up.
Shares of New York-based Alcoa shares closed at $38.63 Monday. Including debt, the offer price totals $33 billion.
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