Canada's Alcan, France's Pechiney and Switzerland's Alusuisse Lonza (algroup) said yesterday that they would not be able to finalise details of where the cuts would come until the merger was completed. But the companies' 5,361 UK jobs at Lynemouth in Northumbria, and at Kinlochleven and Fort William in Scotland, are threatened by the decision to lay off 5 per cent of the groups' combined global workforce.
Sergio Marchionne, algroup's chief executive officer, said the cost reduction programme will be in place within two years and comes in addition to individual profit improvement initiatives already under way at each of the three companies.
The merged group will be based in Canada and will initially be known as Alcan-Pechiney-algroup. About 80 per cent of the planned cuts will come in the company's aluminium operations. The remaining 20 per cent will be derived from the group's packaging business, which will be the world leader in both the cosmetics and pharmaceutical markets. The one- off cash cost of carrying out the cost savings will be $600m.
The merger is expected to be completed within six months and will be effected through two exchange offers to be made by Alcan. Neither of the offers will be conditional on the other, so it is possible that only one of the exchanges will be completed.
Alcan will bid 1.7816 Alcan shares for each Pechiney A share and 20.6291 Alcan shares for each algroup share.
Pechiney will pay a special dividend to its shareholders, which, together with its annual dividend, will total $6.77 a share before tax. The initial two-way combination agreement between Alcan and algroup provides for aggregate break-up fees of $100m with the eventual three-way agreement expected to provide for total break-up fees of $150m.