How Close Is An Alcoa Buyout? Times Thinks Very

Is Alcoa (AA-NYSE) really going to be acquired?  BHP Billiton (BHP-NYSE/ADR) and Rio Tinto (RTP-NYSE/ADR) are each preparing their own $40 Billion bids according to the Tuesday edition of the Times newspaper (link here).  Be aware that the article says that the two are independent and neither has approached the board of directors yet.  If anyone has been following the Alcoa (AA) saga it won’t be a surprise at all that they have lagged and not really participated in the metals rally on their own merit.

This is one that we have listed as one of the "10 Most Undervalued" stocks back in mid-December when shares were closer to $30.00 and we also noted that things were improving and the company was taking efforts to leverage up its balance sheet on January 19 in what seemed like classic anti-takeover leveraging.  If a buyer wants in they better strike before the company initiates the plan fully, otherwise they will be buying a more leveraged asset.  Shares were $31.25 at the time.

Lastly, we ran a break-up value on it just last Thursday showing how its peers could signal up to $46.00 as a break-up value to the stock.

We’ll see if this rumor is real this time or not.  It has been on the potential buyout lists of large companies for some time.  The company is now almost on a yearly high at $35.75 in after-hours, and that is up almost 9% from its 1.1% gainer of a day where it closed at $32.90.  It is hard to know with debt structures and other terms exactly what this would mean for common holders, so keep your eyes and ears open on this one.

Jon C. Ogg
February 12, 2007

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