Sunday, July 15, 2007

BHP for Alcoa Looking More Likely

It's looking like BHP will make an offer of up to $50 bln for Alcoa:
http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2072720.ece
http://observer.guardian.co.uk/business/story/0,,2126420,00.html,

I suspect the Guardian report has it's numbers slightly out of whack. I can't imagine a take-under scenario for AA and that it's more likely BHP would make an offer at a premium especially in light of the shareholder activist element that the Times of London focuses upon.

Friedman Billings is saying $49. JP Morgan (one of BHP's advisors) on Friday mentioned $51 a share as a likely target following a sum of the parts analysis. Bear Stearns said $52 and Credit Suisse is saying $55 to $59. I remain skeptical about CRVD being able to jump into a deal with this type of sticker on the window, but never say never.

Activist shareholders could make a big difference in how this situation plays out. They surely aren't in the mood for a bid with a modest premium from BHP.

If Alcoa management were smart, which they aren't, you'd almost be tempted to think they cooked up the Alcan bid - knowing they would lose, but also knowing it would lift valuations in the whole sector, including their market cap. But, nah.. that would be too ingenious for the Alain Belda led AA. They have unwittingly opened the door to a huge takeover of the company and much to the great benefit of their long suffering shareholders.

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