Outlook: Metal mergers

INVESTMENT BANKERS love code names and the one given to the great aluminium merger due to be unveiled today between Alcan, Pechiney and Alusuisse was Project Olympics. Unless they have all forgotten how to add up this cannot refer to the number of participants. At the last count, there were still five rings in the Olympic logo but only three parties in this latest industrial consolidation.

Perhaps the code name is trying to tell us that opportunities like this only come around once every four years. Then again, it might be an unfortunate reference to the regulatory hurdles the merged company will have to clear before it is allowed to replace Alcoa as the world's number one aluminium producer.

Falling commodity prices and consolidation among the aluminium industry's traditional customers like car makers and engineering companies, have made it inevitable that it too would be forced to bulk up.

Everyone is joining in. It is only a year ago that Alcoa paid $4bn to acquire Alumax, the fourth largest producer in the US. But this deal is different, not only in scale and ambition but also structure. It will be a French-Canadian-Swiss monster with 100,000 employees, $25bn of revenues, a market capitalisation of $19bn and 15 per cent of the world market. In global terms, that sort of share could still slip under the bar but where the merger partners may run into the sand is in their dominance in regional markets, particularly in Europe.

The fact that this is a takeover in all but name of Pechiney and Alusuisse by Alcan appears to have resolved any awkward management issues. Alcan's president, Jacques Bougie, will run the show. Valuations also seem to have been agreed.

But this is still not a done deal. For a start, the three-way memorandum of understanding the partners intend to sign still has to be cleared by Pechiney's workers council, which does not bode well for the scope for future efficiency savings. Alcan may think it is sprinting for the line but in the Olympics the man who carries the flame invariably has a long way to run.

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