Alcan's repeated refusal may force Alcoa to raise hostile bid

Despite US bidder Alcoa Inc's hint of raising its $28-billion hostile bid for rival Canadian aluminium maker Alcan if it were to allow it access to confidential financial information, Alcan Inc, has once again rebuffed Alcoa.

Alcan's refusal to allow Alcoa to share information reportedly set up for other possible bidders has prompted speculation yesterday that the Canadian aluminum producer may be in talks with another potential suitor.

The world's largest mining company, BHP Billiton Ltd of Australia, and London-based second ranked Rio Tinto PLC, are said to be taking a look at Alcan's books, while Brazilian mining conglomerate Companhia Vale do Rio Doce (CVRD), which recently bought Canadian nickel miner Inco Ltd., could also be interested.

Alcoa, itself is believed to be a potential takeover target. In its regulatory filings yesterday it said that its chief executive officer, Alain Belda, had written to Dick Evans, his counterpart at Alcan on 20 June, requesting permission to enter a data room if one had indeed been set up.

The letter hinted at the possibility of sweetening the bid for Alcan. Gaining access to the information here, Belda emphasised, "would help us determine whether there is additional value for your shareholders that may be unlocked beyond that which we have already determined."

Evans responded two days later that Alcan had undertaken a process that included discussions with unnamed third parties and seemed receptive to Alcoa's request, provided it signed a standstill agreement that would freezes any hostile advances.

"If you have an interest in discussing confidential information regarding Alcan, we would, of course, require the signing of an appropriate confidentiality agreement and standstill," Evans wrote. "Please advise me if you wish and are prepared to follow up on this basis."

Belda indicated Alcoa's willingness to work on such an agreement, so long as it took into account Alcoa's existing offer, which did not suit Alcan's board. Accordingly on 27 June the Alcan chief responded saying his company saw " no reason to engage in further discussions or correspondence" with Alcoa.

Analysts interpret Alcoa's approach to Evans as a clear indication of the bidders ability increase its offer and Alcan's refusal to accede to Alcoa's request for entry in to its data room was not entirely surprising given the two years of on and off merger talks that had finally collapsed in December.