TORONTO (CP) -- There is speculation that two of the world's largest mining companies are weighing a C$20-billion-plus bid for Alcan Inc.
The boom in base metal prices has set the world's largest mining companies on a buying spree.
Alcan has 65,000 employees, with 10,600 in Canada, and sports a market capitalization of $19-billion.
''BHP and Rio Tinto have modelled the Alcan takeover, and they've been pitched by bankers to do the deal. But I don't think Alcan is actually in talks with anyone,'' one investment banker with ties to Alcan told the Globe. But he added: ''If either bought Alcan, they would sell the packaging business.''
However, analysts and investment bankers cautioned that a takeover would face a number of hurdles - including regulatory scrutiny - and might not make strategic sense for the buyers.
''I see no reason why Rio Tinto should bid for Alcan,'' said London-based analyst Nick Hatch at Investec Securities. ''I see no real advantage in bidding for an aluminium asset when you already have a portfolio of aluminium and bauxite reserves.''
The financiers said any takeover proposal would likely need to be friendly because Alcan struck a sweet deal with Hydro-Quebec for the electricity it uses in refining, and a hostile buyout could lead to the cancellation of that contract with the government-owned utility.
Both BHP and Rio Tinto are the products of major mergers in the past few years, and both companies are now flush with cash and looking to become price-setting market leaders in all their major business lines.
London-based BHP is the world's largest mining company, although a relatively minor player in aluminium, and has a $76-billion capitalization and shares that trade at 13.9 times earnings.
Rio Tinto is the second-largest mining company, with a presence in most base metals, a $58-billion market capitalization and shares that trade for 11.4 times earnings. (Globe and Mail)
(c) The Canadian Press 2006