Rio Tinto makes desirable bid for Alcan, undercutting Alcoa's hostile takeover attempt.

Mining company Rio Tinto, London, made a friendly offer to become the majority shareholder in Canadian aluminum giant Alcan, Montreal, ousting Alcoa, Pittsburgh, as the high bidder. The offer was under consideration by Alcan shareholders at press time.

The offer to purchase all of Alcan's outstanding common shares for $101 in an all cash transaction represents a total equity consideration for the company of approximately $38.1 billion. That share purchase price would mean Rio Tinto will pay a premium of 65.5% to Alcan's all time high closing price, considerably more than the hostile bid made by Alcoa in May.

Alcoa's offer to acquire Alcan's shares for $58.60 in cash and 0.4108 of a share of Alcoa common stock for each outstanding common share of Alcan was initially rejected, but remained on the table. Based on Alcoa's closing share price on July 11, 2007, that offer amounted to $76.03 per Alcan share. Rio Tinto's offer represents a 32.8% increase.

According to a press release, the goal of the friendly takeover bid would be to create a combined aluminum magnate, Rio Tinto Alcan. Alcoa's bid would have led to a hostile takeover.

"In addition to a very attractive all cash premium, this transaction offers Alcan shareholders the certainty of a clear path to completion," said Alcan chairman Yves Fortier. Rio Tinto has agreed to meet Alcan's existing business and social commitments to Quebec and Canada."