Rio Tinto and Alcan today announced they have reached an agreement for Rio Tinto to make an offer to acquire all of Alcan's outstanding common shares for US$101 per common share in a recommended, all cash transaction. The offer represents a total equity consideration for Alcan of approximately US$38.1 billion. The offer represents a premium of 65.5 per cent to Alcan's all time high closing share price of US$61.03 on 4 May 2007 prior to the Alcoa offer. It also represents a premium of 32.8 per cent to the value of Alcoa's current offer of US$76.03, based on Alcoa's closing share price on 11 July 2007.
The combined aluminium product group, to be named Rio Tinto Alcan, will be a new global leader in the aluminium industry with large, long life, low cost assets worldwide. The combined Group's access to significant bauxite reserves, competitive alumina refining, low cost hydro power, leading smelter technology, and a deep and diverse talent pool provides an excellent position to capitalise on the favourable demand fundamentals of the aluminium industry. Rio Tinto Alcan will also have a strong portfolio of growth projects.
Commenting on the offer, Rio Tinto Chairman Paul Skinner said: "This transaction combines two leading and complementary aluminium businesses, and is a further step in Rio Tinto's strategy of creating shareholder value through investing in high quality, large scale, low cost and long life assets in attractive sectors.
We believe that Alcan, with its proven operating expertise and unique set of competitively positioned aluminium assets and power sources, will be an excellent complement to our existing diversified portfolio. It also adds to our significant presence in Québec and Canada, where we have long standing operations in QIT-Fer et Titane, Iron Ore Company of Canada and Diavik Diamond Mines. We are very pleased that the enlarged aluminium product group, Rio Tinto Alcan, will be headquartered in Montréal and led by the current Alcan chief executive officer, Dick Evans."
Commenting on the attractiveness of the offer to Alcan shareholders, Québec and Canada, Alcan Chairman Yves Fortier said: "The agreed transaction with Rio Tinto is the outcome of a rigorous and thorough process conducted by the Alcan board. 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. In addition to a very attractive all cash premium, this transaction offers Alcan shareholders the certainty of a clear path to completion given our relatively limited operational overlap and a commitment by both parties to an expeditious close. Importantly, Rio Tinto has agreed to meet Alcan's existing business and social commitments to Québec and Canada and the Alcan board has therefore determined that the offer meets the terms of our Continuity Agreement with the Government of Québec."
Tom Albanese, Rio Tinto chief executive, stated: "This transaction will enable Rio Tinto's shareholders to benefit from the quality of Alcan's organisation and asset portfolio, the favourable demand fundamentals of the aluminium sector and the synergies and enhanced development opportunities which the combination of our businesses will deliver. The acquisition will be value enhancing to shareholders, and we expect it to be earnings and cash flow per share accretive to Rio Tinto in the first full year. Rio Tinto intends to retain its focus on mining and metals activities by the divestment of Alcan's Packaging division, as jointly agreed with Alcan. The Engineered Products division will be retained with a focus on managing the portfolio for optimum value."
Dick Evans, Alcan's president and chief executive officer, commented, "With an attractive cost position bolstered by a strong technology portfolio, complementary refining and smelting assets, and a strong growth pipeline, the combination of Rio Tinto and Alcan will create a new global leader in the aluminium industry. We are pleased to have achieved this outstanding result for Alcan's shareholders while being able to offer compelling opportunities for our employees as part of an extremely strong, diversified global organisation with an expanded presence in Montréal. Alcan Packaging will have better opportunities for development and success following its divestiture and we will ensure a smooth transition for all involved. As we move ahead together, we will remain true to our shared values, including commitments to the environment, health, safety and sustainability, and our focus on creating value. I am personally delighted and excited by the opportunity of leading the new larger aluminium group, Rio Tinto Alcan."