Alcan-Algroup-Pechiney merger falls through

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The Independent Online

France's Pechiney, Canada's Alcan Aluminum and Switzerland's Algroup said Thursday they were abandoning their three-way, dlrs 17 billion plans to create one of the largest aluminum companies in the world, the three companies said in a statement.

Alcan and Algroup will still pursue their two-way, dlrs 4.1 billion merger, approved by European regulators last month.

The three-way merger fizzled after Pechiney and Alcan could not agree on which assets to sell to satisfy European antitrust regulators, Pechiney spokesman Jean-Claude Nicholas said.

Last month Pechiney and Alcan were forced to withdraw their application to the European Commission when it was clear the three-way linkup request would be rejected.

The three companies abandoned merger talks Thursday after it became obvious that Alcan was not willing to sell its 50 percent stake in a plant in Germany, Nicholas said.

"The European Commission set conditions that would have undermined the industrial logic, strategic rationale and shareholder value of our respective shareholders," Alcan president Jacques Bougie told analysts in Canada.

Pechiney, the third largest aluminum maker in the world, with consolidated net sales of 9.5 billion euros (dlrs 9 billion) in 1999, said it is in no hurry to find another merger.

"There is no urgency, mostly because Pechiney is much stronger financially than it was a year ago," Nicholas said.

In the long term, however, analysts say Pechiney will need to find acquisitions to stay competitive in the aluminum market.

"There is no urgency in the short term," said Julian Onillon, an analyst for CCF Securities in Paris. "But in the long term they will have troubles."

The smaller-scale merger leaves Alcan as a "second-tier" company, Onillon said.

"For Alcan, the merger is a lot less interesting now," he said. "In the aluminum market, it will become increasingly necessary to have a large market share."

Alcan's Bougie said he predicts the combined Alcan-Algroup company will bring share price increases of 20 to 29 percent over the next three years. The linkup has yet to be approved by shareholders and U.S. regulatory officials.

Pittsburg-based Alcoa, the world's largest aluminum company, is waiting for regulatory approval on its merger with Reynolds. The new company will have combined sales of dlrs 23.5 billion based on 1999 revenue.