the market digests Rio Tinto''s $38-billion takeover of Alcan, focus is starting
to turn to failed rival bidder Alcoa and its Australian joint venture partner
Alumina, and what role BHP Billiton might play in their futures, reports the The
Australian in its business section.(See: Update:
Alcan to merge with Rio Tinto under $38.1 billion deal)
have labelled Rio Tinto''s purchase of the Canadian aluminium producer Alcan,''
a good fit'', For one it would create long-term value for Rio, given the assets
owned by Alcan, the operational synergies and the positive outlook for the aluminium
sector in the longer-term.
the merger catapults Rio Tinto''s aluminium operations from being mid-scale and
a geographically skewed into the largest producer of aluminium in the world, eclipsing
Russia''s UC Rusal , which in a three-way merger between Russian firms Rusal, Sual
and Swiss company Glencore last October, had left Alcoa as the world''s second
largest aluminium producer.
nervousness over the $38.1-billion price pushed Rio Tinto''s shares down in both
the Australian and London; in early trades, its shares were lower 1.8 per cent,
at $101.95, after falling a steeper 4.6 per cent on the London Stock Exchange.
international ratings agency Fitch Ratings has put Rio Tinto on rating watch negative
as Rio Tinto would become highly leveraged after paying for Alcan. Fitch, however,
acknowleged, "Rio Tinto has, however, indicated several measures that could
be used to reduce acquisition debt, including the sale of the Alcan packaging
operations and the potential sale of some of Rio Tinto''s smaller-scale operations,
following a portfolio review to take place in the coming months."
packaging business is estimated at $6 billion, while its engineered products business,
which Rio could sell at a later date, is worth another $6 billion.
Tinto''s last acquisition was Australian multinational mining company North in
2000 for around $2.5 billion and since then it has avoided the mining sector consolidation
Inc, the original bidder from the US, who set the ball rolling with a hostile
$27-billion bid in May after two years of fruitless talks, has withdrawn its $28
billion bid for its Canadian rival, amidst speculation that it is in the radar
of world''s biggest miner BHP Billiton, which was said to be eyeing Rio before
the Alcan deal, as an acquisition target.
rival bid for Alcan is unlikely, says the The Australian, given the high
price already offered
and the $1.05-billion break fee for Rio Tinto if the deal falls apart, as a deterrent
to a possible counter bid.
possible target for Billiton that is being mentioned is Alumina, Alcoa''s 40 per
cent joint venture partner in Alcoa World Alumina and Chemicals (AWAC).