Alcan Inc. said it may use a so- called poison-pill defense to fend off Alcoa Inc.'s $27.7 billion takeover bid and pursue a better deal for shareholders.
Alcan has a shareholder-rights agreement designed to impede a hostile takeover. Under the agreement, dated April 28, 2005, each common share has an associated right that is exercisable if a bidder acquires 20 percent of the aluminum producer's stock. The resulting dilution of the bidder's stake would raise the cost to acquire control of Alcan.
'The board believes that the rights plan is an important instrument to allow it sufficient time to pursue value-enhancing alternatives for shareholders,' Montreal-based Alcan said in a May 22 filing. 'The board intends to use the rights plan only to advance shareholder interests.' Spokeswoman Anik Michaud confirmed today that Alcan may use the defense.
Alcan urged shareholders May 22 to reject New York-based Alcoa's cash and stock bid, saying it doesn't 'adequately reflect the value' of the company. Alcan Chief Executive Officer Richard Evans said talks were under way with other suitors whom he didn't identify.
The Alcoa offer values Alcan at $75.12 a share. Alcan fell $1.50, or 1.8 percent, to $84.39 in New York Stock Exchange composite trading at 4:01 p.m. Alcoa fell 16 cents to $40.21.
Alcoa's offer is a 'permitted bid' under Alcan's shareholder-rights agreement, which wouldn't trigger the pill, Alcoa spokesman Kevin Lowery said. If such a plan is activated, the acquisition becomes too expensive for the buyer, possibly forcing it to negotiate with the target company.
Alcoa, frustrated after two years of unsuccessful merger talks with Alcan, said May 7 it will take its cash-and-stock offer directly to shareholders. The combination would create the world's largest aluminum producer and a company better able to compete against producers in emerging markets, Alcoa Chief Executive Alain Belda said.
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