Update: Alcan to merge with Rio Tinto under $38.1 billion deal

12 July 2007

Anglo-Australian mining group Rio Tinto Plc, the world''s third largest mining company, has agreed to buy Canadian aluminium group Alcan Inc for $38.1 billion at $101 for each Alcan share.

The new company will be called Rio Tinto and have its headquarters in London. The group''s aluminium business, however, will carry the name Rio Tinto Alcan, with headquarters in Montreal.

Alcan''s current chief executive Dick Evans will lead the combined group, which will create the world''s No.1 producer of aluminium, eclipsing Russia''s UC Rusal. Last October, a three-way merger between Russian firms Rusal and Sual and Swiss company Glencore left Alcoa as the world''s second largest aluminium producer.

The price represents a premium of 65.5 per cent to Alcan''s all-time high closing share price of $61.03 on 4 May, before US miner Alcoa''s $27-billion bid afte almost two years of talks. (See: Alcoa makes unsolicited $26.9 billion offer for Alcan)

After being rebuffed by the Alcan board on the grounds that it undervalued the firm, Alcoa announced a hostile bid taking a slightly improved offer of $28 billion to Alcan''s shareholders.

Alcoa''s anxiety for a merger stemmed from being under pressure to either acquire or risk being taken over by a larger rival like Rio Tinto or BHP Billiton. A merger with Alcan would enable Alcoa to fend off the threat of being acquired.