Alcan Firmly In Play As Mining M&A Heats Up

Whether or not Merrill Lynch has been hired to assist in reviewing a takeover bid for Montreal-based Alcan, industry analysts and bankers said the Canadian aluminum producer is now firmly in play.

With its board of directors having already rejected a $27 billion hostile takeover bid by U.S. rival Alcoa,Alcan is now“looking at all options,” said Alcan spokeswoman Crystele Ivins.

Mining industry analysts and banking sources have mooted that the next move could come in the form of a “white knight” bid for Alcan by Anglo-Australian mining firm BHP Billiton.

A spokeswoman for Merrill Lynch declined to comment on media reports suggesting it was advising Alcan, while BHP Billiton also declined to comment.

The merger and acquisition rumor mill has been working overtime of late, with hardly a week going by without one of the major mining companies said to be looking at another. Only Monday, BHP Billiton was reported by The Times of London to have revived plans for a $40 billion takeover of Alcoa.

And last month, BHP Billiton was reported in the Australian media to have been looking at a takeover of Rio Tinto, which in turn was said on May 28 to have hired bankers from Deutsche Bank to advise it on a possible bid for Alcan, the Sydney Morning Herald reported, without citing sources.

On June 13, it was even suggested Alcan could make a counteroffer for Alcoa. Christel Bories, head of Alcan’s engineered products division, said a counteroffer “is one of the options that we are analyzing.”

Although there is as yet no substance to all the smoke, analysts in London said the likelihood of Alcan looking for an alternative suitor is now very real.

“The miners have had the same problem in previous cycles - what to do with the vast cash flow that can’t be accommodated by new projects, dividends and buybacks,” said JPMorgan analyst Jon Bergtheil.