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Alcoa reports 4 percent profit dip

Alcoa reports 4 percent profit dip

Bidder extends deadline on $28 billion offer for Alcan

Alcoa reported a 4 percent decline in second-quarter profits and said it would give Alcan shareholders another month to consider its $28 billion bid for the Montreal-based aluminum producer.

Alcoa extended the deadline for its tender offer for Alcan shares to Aug. 10. It was to have expired today.

Alcoa Chairman and Chief Executive Officer Alain J.P. Belda said the extra month "will provide Alcan shareholders with more time to consider our offer while we continue to pursue the various government and regulatory approvals necessary."

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"We remain the natural partner for Alcan with the most substantial synergies and an unparalleled commitment to Canada and Quebec," Mr. Belda said.

Second-quarter net income totaled $715 million, or 81 cents per diluted share, vs. earnings of $744 million, or 85 cents per share, in the year-ago quarter. Sales rose 3 percent to $8.07 billion. Income from continuing operations of $716 million was the second-best in company history.

The results included charges of 4 cents per share related to outages at smelters in Tennessee and Texas and 2 cents per share related to the bid for Alcan, launched May 7. They were partially offset by a tax-related gain of 2 cents per share.

Analysts expected Alcoa to report adjusted earnings of 81 cents per share.

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The results came after the market closed. Alcoa shares finished yesterday at $42.36, up 70 cents.

Shares of both aluminum producers have climbed since Alcoa made the hostile offer for Alcan based on speculation that other bidders would emerge for one or both companies.

Alcoa's cash-and-stock offer valued Alcan shares at $73.25, a 20 percent premium over their trading price prior to the bid. Based on Alcoa's closing price yesterday, the bid prices Alcan shares at $76.

The spread between that price and Alcan's closing price yesterday of $86.95 reflects investor confidence that either Alcan will find a white knight or that Alcoa will have to sweeten its offer.

Metals analyst Charles Bradford recently told clients Alcoa has $8 billion available to increase its offer, "which may also be keeping third parties away since Alcoa would likely trump any reasonable offer."

Mr. Belda hinted he might be willing to sweeten Alcoa's offer in a letter he sent late last month to Alcan President Richard B. Evans, an overture that was rebuffed. But analysts say Alcoa has little reason to raise the price unless Alcan's discussions with other potential bidders produce a firm counteroffer.

"[Alcoa] will stick with what they put in unless a rival comes along. At this point, no one's really stepped up to the plate," said Andrew Seibert, portfolio manager for Stewart Capital Management of Indiana, Pa.

Shareholders holding only 418,500 of Alcan's 368 million shares have expressed a willingness to accept the tender offer. Alcoa said it could extend the offer beyond Aug. 10.

Mr. Seibert, who owns Alcoa shares, said takeover rumors were the primary reason for the 19 percent run-up in Alcoa shares since its fight for Alcan began.

"Their earnings trends have not been that solid, but they will come around," he said.

First Published: July 9, 2007, 11:45 p.m.

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