Rio Tinto receives Industry Canada approval for Alcan takeover

MONTREAL - Billions of dollars will be flooding into Canada over the coming days as Rio Tinto pays investors for the Alcan shares they tender to conclude the US$38.1-billion takeover of Canada's largest aluminum company. With Canadians holding about 40 per cent of Alcan's 373.2 million shares, more than US$15 billion is expected to be transferred into Canada from the British-Australian mining giant. Some of that money will make its way into federal coffers with the payment of capital gains taxes. Shareholders have until Oct. 23 to tender after Rio Tinto announced its offer is scheduled to expire next Tuesday after its global approvals process culminated with an OK by Industry Canada. Shareholders will receive US$101 per share. The rapid rise of the Canadian dollar means the value of the offer has decreased by 7.7 per cent since it was made on July 12. "It's all systems go,"Rio Tinto spokeswoman Christina Mills said from London. Rio Tinto will gain control of Alcan if two-thirds of Alcan shares are tendered. It can extend the deadline if it falls short or fails to obtain 90 per cent of total shares. Industry Minister Jim Prentice gave the green light under the Investment Canada Act, Rio Tinto said Thursday. "This important step recognizes that we have committed to bring significant benefits to Canada as a result of this transaction,"Rio Tinto CEO Tom Albanese said in a release. "Rio Tinto has been an investor in Canada for decades and is dedicated to growing the combined Rio Tinto Alcan presence, which will be headquartered in Canada and will be positive for Canadian jobs, investment and research and development." Rio Tinto said it obtained Canadian government approval by demonstrating that its acquisition of Montreal-based Alcan would be of net benefit to Canada. "In doing so, Rio Tinto has provided to the minister several important undertakings in relation to Alcan's operations and employees in Canada, including establishing the new global aluminium leader's headquarters in Montreal, ensuring that a majority of Canadian-based senior managers are Canadian, creating a shared services hub in Montreal and ensuring robust R&D employment and expenditures,"the company said. Rio Tinto also made commitments to invest US$1.8 billion in development in Quebec's Saguenay-Lac-St-Jean region and a similar amount for the Kitimat modernization in British Columbia. However, the Kitimat commitment is subject to conditions, including approval of a power sales agreement between Alcan and B.C. Hydro. This would allow Alcan to sell surplus electricity from its facility to the public utility. Published reports quote an Alcan official in British Columbia suggesting a second rejection of the power agreement would likely kill the upgrade. But Alcan spokesman Anik Michaud said it's premature and speculative to say it won't proceed. "I'm not willing to go that far,"she said in an interview. "I'm not going to speculate on the BCUC (British Columbia Utilities Commission) decision and if it's negative what are the actions that we're going to take at that point." She said failure of the Kitimat project don't undermine the benefits of the Rio Tinto deal since the same situation would apply even if there were no takeover of Alcan. An Industry Canada spokesman agreed. "We'd have to look at it at that point, but presumably Alcan wouldn't have received the regulatory approvals either,"said Eric Dagenais. Rio Tinto is a global mining group combining Rio Tinto PLC, a London-listed company, and Rio Tinto Ltd., listed on the Australian Securities Exchange.