JANA Partners urges Alcoa to stop pursuit of Alcan

By Lisa Kerner

Charlotte, N.C., May 8 - Alcoa Inc. shareholder JANA Partners LLC asked the company's board of directors to drop its "ill-advised pursuit" of Alcan Inc. and focus on creating shareholder value instead by exploring strategic alternatives, including a sale of Alcoa.

"Given Alcoa's long history of failing to generate shareholder value through acquisitions, we believe that its greatest value can be realized through a sale or break-up of the company," JANA managing partner Barry Rosenstein said in a letter to Alcoa chairman and chief executive officer Alain J.P. Belda.

"Furthermore, we believe that most new shareholders have been attracted to the company's stock for the same reason and not as the result of any confidence in management's skill as acquirers. By the same token, we assume that yesterday's rise in your share price has more to do with speculation that Alcoa is a target than its acquisition plans."

Rosenstein said Alcoa did its shareholders a disservice by designing an offer that did not require their approval and by not announcing the acquisition plans prior to the recently held annual meeting.

On Monday, Alcoa said it planned to begin a tender offer on Tuesday to acquire Alcan for $58.60 per share in cash plus 0.4108 of a share of Alcoa common stock in a deal valued at an estimated $33 billion, or $73.25 per share.

The offer and rights withdrawal are slated to expire at 5 p.m. ET on July 10, with the deal expected to close by the end of 2007, according to a company news release.

At least 66 2/3% of Alcan's common shares must be tendered as a condition of the offer.

Alcan's board of directors said it will consider Alcoa's proposal and its impact on shareholders.

"This offer follows almost two years of discussions between our companies regarding a variety of potential business combination transactions, including unsuccessful board-level discussions of a merger transaction last fall," Belda said in the release.

"We are very disappointed that those efforts did not result in a negotiated transaction - a conclusion we would have strongly preferred. We believe firmly in the compelling strategic rationale behind the combination of Alcoa and Alcan and are convinced that this transaction creates substantial value for both sets of shareholders and for our customers around the world. We are therefore taking our offer directly to Alcan shareholders."

Alcoa is a New York-based aluminum manufacturer with 122,000 employees in 44 countries.

Montreal-based Alcan is a global materials company specializing in bauxite mining, alumina processing, primary metal smelting, power generation, aluminum fabrication, engineered solutions and specialty packaging.

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