Alcan Aluminium of Canada, Pechiney of France and Algroup of Switzerland will today announce a three-way intercontinental merger creating an aluminium company to rival Alcoa, the world's biggest producer.
If it goes ahead, the merger would advance consolidation in an industry that has long suffered from over-capacity and low prices. Last year, Alcoa acquired Alumax, another large US group, and Algroup attempted unsuccessfully to merge its Alusuisse aluminium interests with Viag of Germany.
The merger would be accomplished through agreed all-share offers by Alcan for Pechiney and Algroup. The deal would give Alcan shareholders 44 per cent of the new company, with 29 per cent for Pechiney and 27 per cent for Algroup.
Alcan is the former owner of the Aughinish Alumina refinery on the Shannon Estuary in Co Limerick. It sold the plant to the Swiss company, Glencore, in January of this year. The price was not disclosed, but Alcan took an after-tax loss of $120 million (£88.8 million) on the sale. Glencore International is a privately-held global natural resources company based in Baar, Switzerland. Its sales in 1996 amounted to $34 billion.
The newly-merged group - to be known temporarily as Alcan-Pechiney-Algroup (APA) - will be headed by Alcan chief executive Jacques Bougie, with Pechiney chief executive JeanPierre Rodier as chief operating officer.
The partners will tell a London press conference that the group will have its primary stock exchange listing in New York, with subsidiary listings in Canada, France, Switzerland and possibly London.
The group's headquarters will be in Montreal, with a regional headquarters in Europe, and it will use Canadian accounting standards. However, it will report in US dollars, and Mr Bougie's office will be in New York.
The merged group would have a market capitalisation of £18.2 billion sterling (€27.16 billion) based on last night's closing prices - compared with Alcoa's £22.2 billion sterling.
APA's notional market capitalisation also includes the speciality chemicals operations of Algroup, thought to be worth between £1.5 billion sterling and £2 billion sterling, which will be spun off tax free to shareholders.
Analysts said APA would have aluminium smelting capacity of about 3.2 million tonnes per year after taking account of plant that is idle or under construction, compared with Alcoa's 3.1 million tonnes. Alcan and Algroup are understood to have entered a definitive two-way agreement. The threeway deal is contingent on approval by Pechiney's board, which was meeting last night, and its workers' council.
The merged group would need regulatory approval in Canada, Switzerland, France and the European Union, and possibly also in the US. The partners met European Commission officials last week, and some indications of likely approval are thought to have been given.
The companies will say they are not planning to close capacity, but about 5 per cent of their total workforce of about 95,000 will lose their jobs as part of a cost-saving programme expected to generate $600 million. The partners had combined sales and operating revenues of $21.6 billion in 1998, of which about $17.4 billion was accounted for by aluminium sales.
