Rio corners world's aluminium

RIO Tinto is poised to become the world's biggest aluminium producer after launching a $A44.23 billion takeover bid for Canadian aluminium group Alcan Inc. The offer of $US101 ($A117.26) a share trumps an earlier cash-and-scrip bid from Alcoa Inc of the U.S. worth about $A31.35 billion. Rio Tinto chief executive Tom Albanese said the benefits of the proposed acquisition would be felt in the first full year. It would "value-enhancing to shareholders and we expect it to be earnings-and-cashflow-per-share accretive to Rio Tinto in the first full year". It would also generate after-tax synergies of around $600 million per year. The bid rounds off months of speculation that another offer for Alcan could emerge, from parties including Rio Tinto. It also follows signals from Rio Tinto that it was keen to expand its aluminum business to take advantage of high prices and demand. "This transaction combines two leading and complementary aluminium businesses and is a further step in Rio Tinto's strategy of creating shareholder value through investing in high-quality, large-scale, low-cost and long-life assets in attractive sectors," Rio Tinto chairman Paul Skinner said. "We believe that Alcan, with its proven operating expertise and unique set of competitively positioned aluminium assets and power sources, will be an excellent complement to our existing diversified portfolio." It would also add to Rio Tinto's existing assets in Canada, including its QIT-Fer et Titane and Iron Ore Company of Canada operations in Quebec and Diavik Diamond Mines in the Northwest Territories. Alcan's board of directors has unanimously recommended the offer and, if the takeover proceeds, the new entity will be called Rio Tinto Alcan and Alcan's packaging business will be divested. "Rio Tinto intends to retain its focus on mining and metals activities by the divestment of Alcan's packaging division, as jointly agreed with Alcan," Mr Albanese said. Rio Tinto Alcan would be headquartered in Montreal, Canada, and led by current Alcan chief executive Dick Evans. The offer price represents a premium of 65.5 per cent to Alcan's all-time high closing share price of $US61.03 ($A70.85) on May 4, before Alcoa's hostile offer. It also represents a premium of 32.8 per cent to the value of Alcoa's current scrip-and-cash offer of $US76.03 ($A88.27), based on Alcoa's July 11 closing share price. "With an attractive cost position bolstered by a strong technology portfolio, complementary refining and smelting assets and a strong growth pipeline, the combination of Rio Tinto and Alcan will create a new global leader in the aluminium industry," Alcan's Mr Evans said. It would be the world's largest producer of bauxite and aluminium. Rio Tinto said it "recognises Australia's strengths in bauxite extraction and alumina-refinery operations and project development". "It is committed to leveraging those strengths by locating the combined global bauxite and alumina business and associated research and development activities in Queensland," it said. Rio Tinto intends to finance the offer with newly committed bank facilities underwritten by The Royal Bank of Scotland, Deutsche Bank, Credit Suisse, and Societe Generale but has stressed the offer is not conditional on financing. Rio Tinto's shares were placed in a trading halt before the market closed yesterday but last traded $1.07 higher for the day at $103.84.