Alcan auction saw six suitors circling

Alcan Inc. held talks with as many as six potential deal partners during a whirlwind two-month auction process before accepting Rio Tinto PLC's $38-billion (U.S.) takeover bid over a rival, last-minute, all-cash offer from a Brazil's CVRD. According to documents filed yesterday with securities regulators, London-based Rio Tinto signed a confidentiality agreement with Alcan in April and later that month submitted a written takeover proposal to the aluminum producer, which was rejected on May 1. Just six days later, U.S. aluminum rival Alcoa Inc. launched a $28-billion hostile bid for Alcan, sparking a frenzied search by the Montreal company for a partner to help it fend off the Alcoa proposal, which it rebuffed as inadequate and highly conditional. That same day, Rio Tinto chief executive officer Tom Albanese phoned Alcan CEO Dick Evans and said Rio was prepared to "come to the assistance" of Alcan with an all-cash deal worth more than Alcoa's stock-and-cash bid, the documents said. Alcan however, didn't commit exclusively Rio Tinto and talked with at least five other parties about a possible deal, a process that resulted in two firm offers tabled July 11. In the days before the bid deadline, Alcan had multiple meetings with management and advisers from both Rio Tinto and a party referred to in the filings as "company C," which sources have identified as Brazilian iron ore heavyweight Companhia Vale do Rio Doce. The negotiations between Alcan and the duelling bidders covered all terms and conditions of an offer for Alcan other than the final per share price for Alcan shares, the documents said. On July 11, a committee of Alcan's board of directors met to review the final offers submitted by CVRD and Rio Tinto. Sources have said that CVRD's bid was well above $90 a share. It was not, however, enough to beat Rio Tinto's $101-a-share bid, valuing Alcan at more than $38-billion, the largest foreign takeover offer in Canadian history. Rio Tinto first approached Alcan about a possible deal in early October, 2006, the documents, filed separately by Alcan and Rio Tinto, show. The discussions involved various executives from both companies, including Alcan's Mr. Evans and chairman Yves Fortier and their respective counterparts at Rio Tinto, Mr. Albanese and Paul Skinner. In early April, Rio Tinto and Alcan signed a confidentiality agreement, but Alcan was not willing to commit to exclusive talks with the mining giant. In fact, Mr. Evans had also been discussing a potential deal with a company referred to in Alcan's circular as "company A" that could have seen "a merger of equals" transaction, the documents said. Company A is thought to be Norsk Hydro ASA of Norway, which Alcan director Paul Tellier has said Alcan considered buying or merging with as an alternative to the Alcoa offer. In exchange for signing the confidentiality agreement in early April, Rio Tinto's legal advisers were given access to a so-called "continuity agreement" between Alcan and the government of Quebec in December, 2006. The agreement detailed Alcan's arrangements with Quebec for hydro and water rights needed to power its smelters in the Saguenay area. Alcan had also held discussions with Alcoa for two years before talks broke off in December, 2006, just before the continuity agreement with Quebec was signed as part of Alcan's commitment to invest $2-billion in the Saguenay region over 10 years. In addition to Rio Tinto, Norsk and CVRD, Alcan discussed possible deals with three other parties, according to the documents. Sources have said Australia's BHP Billiton Ltd. showed interest, but never submitted a takeover proposal. Mr. Evans is in for a massive payday if the deal succeeds. He holds 636,245 Alcan stock options, worth roughly $37-million when tendered to the bid. He's also entitled to receive $8.1-million as part of a change-of-control provision, and stock price units worth $3.5-million and $1.5-million as part of a shareholder return performance plan. ALCAN Close: $100.34 (Cdn.), down $1.18