Alcan (AL) turned down a buy-out offer from rival aluminum company Alcoa (AA). Rumors are that the Canadian company is now in talks with Australian metal giant BHP Billiton (BHP), and that another company, Rio Tinto (RTP) may be in the wings. But, only Alcoa has put a deal on the table.
Alcan’s board rejected the Alcoa offer using this language: "It does not adequately reflect the value of Alcan’s extremely attractive assets, strategic capabilities and growth prospects,"
That is all well and good, but Alcan’s stock had only performed as well as the S&P over the last year, until the Alcoa offer came along. Taken from the shareholder’s point of view, the deal was a bonanza. Alcan’s stock went from below $60 to almost $82.
There is no saying how long Alcan’s stock would have taken to get to $80 on its own.It may never get there. Looking back over five years, the company had done no better than the S&P, so it is not as if the shares have been a world beater. Until the company got itself into play.
Obviously, the Alcan board does not think that "a bird in the hand is worth two in the bush". But, they have a terrible problem on their hands if no new bid comes from BHP or another company. The stock will drop back to $60 and it will be hard to argue that anyone holding shares in Alcan won.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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