Alcoa Declines As Goldman Says Few Potential Buyers

July 26 -- Alcoa Inc. shares had their biggest decline in more than two-and-a-half years after Goldman, Sachs & Co. said the world's second-largest aluminum producer may remain independent because there are few potential buyers of the company. Shares of New York-based Alcoa slid $2.91, or 7.1 percent, to $38 as of 4 p.m. in New York Stock Exchange composite trading. That's the steepest decline since Sept. 10, 2004. Alcoa dropped its $27.7 billion hostile bid for Canadian aluminum producer Alcan on July 12 after Rio Tinto Group bid $38.1 billion. Alcoa's withdrawal renewed speculation the company itself may be a takeover target. "While Alcoa could potentially entertain an Alcan type bid, we believe the limited list of buyers, the potential long term benefits of an asset restructuring in downstream and upstream segments, plus increasingly strong fundamentals on the aluminum market, provide a strong incentive for Alcoa to remain independent," Goldman analyst Oscar Cabrera wrote in a note to investors. BHP Billiton Ltd., the world's largest mining company, Anglo American Plc, the second biggest, and Cia. Vale do Rio Doce, the world's biggest iron-ore producer, are potential buyers, the New York-based analyst said. Alcoa's businesses would not get an "appropriate valuation" because of a lack of "fit" between these companies and Alcoa, wrote Cabrera. The analyst reinstated a "neutral" rating on Alcoa and set a share-price estimate of $48. Shares of raw-materials producers plunged today on concern that slowing economic growth may reduce demand for commodities. Merrill Lynch & Co. Chief Investment Strategist Richard Bernstein said investors should stop speculating that takeovers will send shares higher because credit markets are signaling that the buyout boom is ending. The takeover speculation has helped fueled a rally in Alcoa shares, which have gained 37 percent over the past year through yesterday.