Shares in Alcoa rose by more than 4% yesterday, on rumours that Rio Tinto Alcan was preparing a bid to buy the American aluminium producer.
Markets are full of rumours every day, and I have no information which would suggest that there is any truth in this one. But it makes for some idle speculation.
RTA has slightly smaller capacity than Alcoa, with the former clocking in at around 4 million tonnes, while Alcoa boasts 4.5 million. But the overall age of Alcoa’s fleet of smelters is somewhat older. Alcoa has a bigger presence in Iceland, home of abundant geothermal energy, and is building the Ma’aden smelter in Saudi Arabia. But RTA has its AP5x and reportedly even an AP6x technology. Importantly, Alcoa has a more complete integration picture – both have plenty of alumina capacity, but RTA has lost most of its downstream capability.
Of course, there would be serious anti-trust issues, especially in North America where the two companies are giants.
However, I can’t help but think back to 2007, when the boot was on the other foot. Back then, Alcoa made a tilt for Alcan. That was in the days before Rio Tinto, Chinalco and the Global Financial Crisis. But who can forget the arrogance of one particular Alcoa exec at the CRU Aluminium Conference in Bahrain in 2007. This certain SVP (I won’t name him) got up and made a speech at the conference, showing attendees how Alcoa would take the poor floundering Alcan under its wing, and with Alcoa’s help the two companies would be a powerhouse for decades to come.
I remember seeing the Alcan people sitting there stony-faced, quietly fuming at the bald-faced claims that bordered on ridiculous. To their good grace, they made no comment after the speech. *
Of course, that deal never went down. Rio took Alcan, then Chinalco took a chunk of Rio. Alcoa got to keep their cash, which was probably best with the GFC around the corner.
* Declaration of bias – I used to work at a JV subsidiary of Alcan, for more than 4 years. I also used to work for Alcoa, for almost 14 years.