Rio Tinto reaches $38.1B US merger deal with Alcan

Alcan Inc., Canada's biggest aluminum producer, and Australian mining titan Rio Tinto announced Thursday that they have reached a friendly takeover deal in a move thatthwarted a hostile bid by Alcan's U.S. rival, Alcoa.

Alcan's share price jumped $8.35, or almostnine per cent, to finish at$102.75on the Toronto Stock Exchange.

Alcan's board of directors unanimously recommended shareholders accept Rio Tinto's cash offer of $101 US per share, which values Alcan at $38.1 billion US — topping Alcoa's $28-billion bid.

Late Thursday afternoon, Alcoa withdrew its offer.

"Rio's offer for Alcan strongly reinforces our view of the underlying value in the aluminum industry and its bright prospects for the future," said Alcoa chairman and CEO Alain Belda in a release.

"However, at this price level, we have more attractive options for delivering additional value to shareholders," he said.

If successful, the Alcan-Rio Tinto merger would create the world's largest aluminum company. Rio Tinto Alcan would be in based in Montreal and led by current Alcan chief executive Dick Evans, the companies said.

Rio Tinto's offer represents a premium of 32 per cent over Alcoa'snow-withdrawn $76.03 US per share bid.

Alcan chairman Yves Fortier said the transaction is both attractive to shareholders and in line with the company's values.

"The agreed transaction with Rio Tinto is the outcome of a rigorous and thorough process conducted by the Alcan board," Fortier said. "It achieves all of our stated goals, providing clearly superior value to Alcan shareholders while remaining true to our core values and obligations as responsible corporate citizens," he said.

Rio Tinto chairman Paul Skinner said the acquisition would add to the presence the company already has in Canada, including operations in QIT-Fer et Titane, IronOre Company of Canada and Diavik Diamond Mines.

"We believe that Alcan, with its proven operating expertise and unique set of competitively positioned aluminum assets and power sources, will be an excellent complement to our existing diversified portfolio," he said.

Asked during a press conference in Montreal whether he expected a counter offer to emerge, Rio Tinto chief executive Tom Albanese said that was just speculation.

"I do think this is an excellent offer that makes the utmost sense for Alcan shareholders," Albanese said.