12th Jul 2007 07:50
Rio Tinto PLC12 July 2007 Rio Tinto makes a recommended all cash offer for Alcan • Cash offer price of US$101 per common share values Alcan at US$38.1 billion. • Excellent fit with Rio Tinto's overall asset portfolio, strategy and value focus. • Creation of a new global leader in the aluminium industry to be called Rio Tinto Alcan. • Alcan's board of directors unanimously recommends acceptance of the offer and states that Rio Tinto's proposal fully meets the requirements of the Continuity Agreement. • Global headquarters of Rio Tinto Alcan to be in Montreal, led by current Alcan chief executive Dick Evans. • Rio Tinto and Alcan agree to divest Alcan Packaging business. Montreal, Melbourne and London (12 July 2007) - Rio Tinto and Alcan todayannounced they have reached an agreement for Rio Tinto to make an offer toacquire all of Alcan's outstanding common shares for US$101 per common share ina recommended, all cash transaction. The offer represents a total equityconsideration for Alcan of approximately US$38.1 billion. The offer represents a premium of 65.5 per cent to Alcan's all time high closingshare price of US$61.03 on 4 May 2007 prior to the Alcoa offer. It alsorepresents a premium of 32.8 per cent to the value of Alcoa's current offer ofUS$76.03, based on Alcoa's closing share price on 11 July 2007. The combined aluminium product group, to be named Rio Tinto Alcan, will be a newglobal leader in the aluminium industry with large, long life, low cost assetsworldwide. The combined Group's access to significant bauxite reserves,competitive alumina refining, low cost hydro power, leading smelter technology,and a deep and diverse talent pool provides an excellent position to capitaliseon the favourable demand fundamentals of the aluminium industry. Rio Tinto Alcanwill also have a strong portfolio of growth projects. Commenting on the offer, Rio Tinto Chairman Paul Skinner said: "This transactioncombines two leading and complementary aluminium businesses, and is a furtherstep in Rio Tinto's strategy of creating shareholder value through investing inhigh quality, large scale, low cost and long life assets in attractive sectors. We believe that Alcan, with its proven operating expertise and unique set ofcompetitively positioned aluminium assets and power sources, will be anexcellent complement to our existing diversified portfolio. It also adds to oursignificant presence in Quebec and Canada, where we have long standingoperations in QIT-Fer et Titane, Iron Ore Company of Canada and Diavik DiamondMines. We are very pleased that the enlarged aluminium product group, Rio TintoAlcan, will be headquartered in Montreal and led by the current Alcan chiefexecutive officer, Dick Evans." Commenting on the attractiveness of the offer to Alcan shareholders, Quebec andCanada, Alcan Chairman Yves Fortier said: "The agreed transaction with Rio Tintois the outcome of a rigorous and thorough process conducted by the Alcan board.It achieves all of our stated goals, providing clearly superior value to Alcanshareholders while remaining true to our core values and obligations asresponsible corporate citizens. In addition to a very attractive all cashpremium, this transaction offers Alcan shareholders the certainty of a clearpath to completion given our relatively limited operational overlap and acommitment by both parties to an expeditious close. Importantly, Rio Tinto hasagreed to meet Alcan's existing business and social commitments to Quebec andCanada and the Alcan board has therefore determined that the offer meets theterms of our Continuity Agreement with the Government of Quebec." Tom Albanese, Rio Tinto chief executive, stated: "This transaction will enableRio Tinto's shareholders to benefit from the quality of Alcan's organisation andasset portfolio, the favourable demand fundamentals of the aluminium sector andthe synergies and enhanced development opportunities which the combination ofour businesses will deliver. The acquisition will be value enhancing toshareholders, and we expect it to be earnings and cash flow per share accretiveto Rio Tinto in the first full year. Rio Tinto intends to retain its focus onmining and metals activities by the divestment of Alcan's Packaging division, asjointly agreed with Alcan. The Engineered Products division will be retainedwith a focus on managing the portfolio for optimum value." Dick Evans, Alcan's president and chief executive officer, commented, "With anattractive cost position bolstered by a strong technology portfolio,complementary refining and smelting assets, and a strong growth pipeline, thecombination of Rio Tinto and Alcan will create a new global leader in thealuminium industry. We are pleased to have achieved this outstanding result forAlcan's shareholders while being able to offer compelling opportunities for ouremployees as part of an extremely strong, diversified global organisation withan expanded presence in Montreal. Alcan Packaging will have betteropportunities for development and success following its divestiture and we willensure a smooth transition for all involved. As we move ahead together, we willremain true to our shared values, including commitments to the environment,health, safety and sustainability, and our focus on creating value. I ampersonally delighted and excited by the opportunity of leading the new largeraluminium group, Rio Tinto Alcan." Excellent fit with Rio Tinto's portfolio, strategy and value focus Alcan has a high quality upstream asset portfolio with a sustainable low costposition through its excellent access to long life hydro power. In addition, theAlcan technology and hydro assets complement Rio Tinto's existing energy andclimate change strategy, which is to position the Group for a future in whichcarbon emissions will be constrained. The transaction is expected to create a new global aluminium industry leader inbauxite, alumina, power, aluminium and technology - with a strong pipeline ofattractive growth projects for the future. Rio Tinto Alcan would be the largestglobal producer of aluminium and bauxite, based on current production, with adefined pathway through the commissioning of Gove and the committed expansion ofYarwun to becoming the largest producer of alumina. The acquisition of Alcan will position Rio Tinto to capitalise on the strongdemand fundamentals of the aluminium sector. The attractive physical propertiesof aluminium have ensured its use in a wide range of applications at all stagesof economic development, including construction and infrastructure development,transportation, and consumer goods and packaging. The offer is value enhancing to Rio Tinto shareholders based on Rio Tinto'srigorous project evaluation criteria. Rio Tinto expects the acquisition to beearnings and cash flow per share accretive to Rio Tinto in the first full yearof consolidation. Overall anticipated post tax synergies from the transaction are expected to bearound $600 million per year. The combination of the two companies' existingassets offers attractive opportunities to consolidate ownership and achievecapital and operational efficiencies. The geographical profile of the combined businesses will provide an enhancedplatform to exploit future global growth opportunities. The increased overall size of Rio Tinto following the transaction will providethe opportunity for a strategic review of all Rio Tinto assets focusing on thosewhich lack the long term competitive position to belong in the larger Group. Operations in Quebec/ Canada Rio Tinto has been an investor in Quebec and Canada for decades and currentlyhas significant business activities in the Province of Quebec (including QIT-Feret Titane and Iron Ore Company of Canada), and the Northwest Territories (DiavikDiamond Mines). In 2006, these assets generated revenues of US$2.3 billion(representing nine per cent of Rio Tinto's gross revenues) and paid taxes ofUS$409 million (representing 11 per cent of total taxes paid by Rio Tinto). In2006, Rio Tinto employed approximately 4,300 people in Canada, with asignificant number located in Quebec. Rio Tinto is committed to growing the combined Rio Tinto and Alcan presence inCanada, particularly in the Provinces of Quebec and British Columbia. Inaddition to headquartering the combined aluminium product group in Montreal, RioTinto will maintain the product group's aluminium smelting technology researchand development headquarters in Quebec. This will involve the relocation of RioTinto Aluminium's existing smelting technology unit to Quebec. In addition, Rio Tinto intends to locate one of its regional shared service hubsin Montreal to support its enlarged asset base and operations in Canada. Operations in Australia Rio Tinto recognises Australia's strengths in bauxite extraction and aluminarefinery operations and project development. It is committed to leveraging thosestrengths by locating the combined global Bauxite and Alumina business andassociated research and development activities in Queensland. As Rio Tinto andAlcan's assets in Australia are largely complementary, it is expected that themerger and integration will provide opportunities for cost synergies and revenueenhancement as a result of expansion of Australian output. Rio Tinto has a significant programme of capacity growth in place following therecent announcement of the expansion at Rio Tinto's Yarwun alumina refinery, andthe ongoing bauxite capacity expansion at Weipa. Operations in France Rio Tinto has had operations in France since the 1960s, and maintains a researchand development facility for its Diamonds and Minerals product group inToulouse. Rio Tinto recognises Alcan's extensive presence in France as well asFrance's long history of expertise in research and development in aluminiumtechnology. Rio Tinto is committed to building upon Alcan's research anddevelopment capabilities in France, including advanced smelter technologyprogrammes, currently under development by Rio Tinto Aluminium. Common cultures Rio Tinto and Alcan share demonstrated common values, including a strongcommitment to the principles of sustainable development, including health andsafety of employees, excellence in environmental stewardship and positiveengagement with local communities. Accordingly, Rio Tinto is committed tocreating the Rio Tinto Alcan foundation in Canada, which will have an endowmentof C$200 million built-up over a five year period. It will replace Alcan'sexisting practice of donating one per cent of pre-tax profits to community,educational, cultural and charitable commitments. Governance, management and employees Rio Tinto holds Alcan's organisation in high regard and the current Alcanexecutive team will play a role in both the combined aluminium business and theenlarged Rio Tinto Group. The current Alcan chief executive officer, Dick Evans,will become chief executive of the combined aluminium product group, Rio TintoAlcan, based in Montreal and will report directly to Rio Tinto's chiefexecutive, Tom Albanese. Alcan employees will benefit from opportunities withinthe enlarged Rio Tinto Group, including a stronger and more strategicallypositioned upstream aluminium business. Key positions in Rio Tinto Alcan will befilled by people from both organisations. The combination of the twoorganisations will afford Alcan and Rio Tinto employees unparalleledopportunities to develop their careers. Rio Tinto will add three new members to its board: two non-executive members ofthe Alcan board and Dick Evans as chief executive of the aluminium productgroup. The size of the board will therefore increase on closing from 13 to 16. Rio Tinto intends to pursue the basis for a secondary listing of Rio Tinto plcshares on the Toronto Stock Exchange. Rio Tinto plans to establish a Canada Forum comprising the chairman, chiefexecutive, Canadian non-executive directors, other Canadian advisers and seniorexecutives based in Canada, including the chief executive of Rio Tinto Alcan, toadvise its board on Canadian economic, political and social issues. This will bemodelled on Rio Tinto's comparable Australia Forum. Given the increased importance of France in Rio Tinto's portfolio which willresult from this transaction, Rio Tinto intends to appoint a suitably qualifiedadviser from Alcan's existing group of non-executive directors to assist inrelation to business developments in France. Board of Alcan recommendation The board of Alcan, after consulting with its financial and legal advisors andthe Strategic Committee of directors, has unanimously recommended that Alcanshareholders should accept the offer. Morgan Stanley, acting as lead financialadvisor to the board of Alcan, has provided a written opinion to the board ofAlcan that the offer is fair, from a financial point of view, to Alcanshareholders. Support agreement The support agreement between Rio Tinto and Alcan provides for a break fee ofUS$1,049 million payable by Alcan to Rio Tinto in certain circumstances, and ofa break fee payable by Rio Tinto to Alcan in certain circumstances equal to thelesser of US$1,049 million and one per cent of the market capitalisation of RioTinto on the date such payment becomes due. Separately, Rio Tinto or Alcan maybecome liable to pay expense reimbursement of US$200 million to the other partyin certain circumstances. In addition, the agreement contains, among otherthings, customary terms and conditions for an agreement of this nature,including a non-solicitation provision, the right of notification should Alcanreceive a third party proposal and the right to match any proposal which theboard of Alcan deems superior. Continuity agreement A special feature of the proposed transaction is Alcan's obligations under theContinuity Agreement with the Quebec Government. The Continuity Agreement was signed in 2006 when Alcan, the Government of Quebecand Hydro Quebec agreed upon investments, loans, and further water and powerrights. Alcan then made an undertaking that it would maintain its head officeand principal place of business in Quebec and that it would ensure that, in theevent of a change of control, the acquirer would maintain the same level andquality of commitments in Quebec to socio-economic programmes and to regionaldevelopment as then existed at Alcan. In such eventuality, a potential acquirer needs to demonstrate that, as a resultof the proposed transaction, there is no reasonable basis to believe that therewill be either a diminishment of Alcan's commitment to the economy and societyof Quebec or a direct or indirect negative impact on the economy and society ofQuebec. Rio Tinto has given assurances, evidence and commitments to the board of Alcanand the Government of Quebec that Rio Tinto Alcan will maintain its head officeand principal place of business in Quebec together with the same level andquality of commitments as now exist at Alcan. Rio Tinto has demonstrated to the satisfaction of the board of Alcan that therequirements of the Continuity Agreement have been met and is notifying theGovernment of Quebec accordingly. About the offer Rio Tinto expects to file the offer and takeover bid circular containing thefull terms, conditions and other details of the offer with the CanadianSecurities regulatory authorities and the Securities and Exchange Commission ofthe United States on or about 23 July 2007. The offer is subject to a number of conditions including valid acceptances ofnot less than 66 2/3 per cent of Alcan shares on a fully diluted basis andthe approval of Rio Tinto shareholders. The board of Rio Tinto has approved thetransaction and has undertaken to recommend the transaction to its shareholders,at the time of mailing the shareholders circular. The offer will also be subjectto certain customary conditions including receipt of necessary regulatory andantitrust approvals, including in the United States, Canada, the European Unionand Australia, and the absence of material adverse changes or effects. Theoffer is expected to close in the fourth quarter of 2007. The offer will be made to holders in France of shares admitted to trading onEuronext-Paris. An announcement including the main information relating to Rio Tinto's offerdocuments will be prepared and released pursuant to article 231-24 of the AMFGeneral Regulation and will contain information relating to how and the timeperiod within which Alcan shareholders residing in France can accept this offer. The offer will be made to holders in Belgium of Alcan shares and/or certificatesadmitted to trading on Euronext-Brussels (the ''IDRs''). A Belgian supplement,addressing issues specific to holders of shares and/or IDRs in Belgium (the ''Belgian Supplement'') is expected to be approved by the Belgian Banking,Finance and Insurance Commission. Once such approval has been obtained, theoffer and takeover bid circular can be made available in Belgium to holders ofshares and/ or IDRs together with the Belgian Supplement. Financing The acquisition of Alcan will be financed by Rio Tinto through newly committedbank facilities underwritten by The Royal Bank of Scotland, Deutsche Bank,Credit Suisse, and Societe Generale. The offer will not be conditional onfinancing. Rio Tinto's goal is to maintain a single A rating. The commitment toa progressive dividend policy will be maintained. The existing Rio Tintobuyback programme will be discontinued. About Rio Tinto Rio Tinto is a leading international mining group headquartered in the UK,combining Rio Tinto plc, a London listed company, and Rio Tinto Limited, whichis listed on the Australian Securities Exchange. Rio Tinto's business is finding, mining, and processing mineral resources. Majorproducts are aluminium, copper, diamonds, energy (coal and uranium), gold,industrial minerals (borax, titanium dioxide, salt, talc) and iron ore.Activities span the world but are strongly represented in Australia and NorthAmerica with significant businesses in South America, Asia, Europe and southernAfrica. The Group's objective is to maximise the overall long term return toshareholders through a strategy of investing in large, cost competitive mines,driven by the quality of each opportunity, not the choice of commodity. Wherever Rio Tinto operates, the health and safety of its employees is the firstpriority. The Group seeks to contribute to sustainable development. It works asclosely as possible with host countries and communities, respecting their lawsand customs and ensuring a fair share of benefits and opportunities. About Alcan Alcan Inc. is a leading global materials company, delivering high qualityproducts, engineered solutions and services worldwide. With operations inbauxite mining, alumina processing, primary metal smelting, power generation,aluminium fabrication, engineered solutions as well as flexible and specialtypackaging, and with world class technology, Alcan is well positioned to meet andexceed its customers' needs. Alcan is represented by 68,000 employees, includingits joint ventures, in 61 countries and regions. For the year ended 31 December 2006, Alcan had audited consolidated revenues ofUS$23,641 million (2005: US$20,320 million), and profit before taxation ofUS$2,373 million (2005: US$323 million). Alcan had audited gross assets as at 31December 2006 of US$28,939 million. The Alcan financial information presentedabove has been extracted without material amendment from published financialreports prepared under US GAAP. Advisers and counsel Deutsche Bank along with CIBC World Markets have acted as principal advisers toRio Tinto on the transaction. Rio Tinto has also taken some advice from CreditSuisse and Rothschild. Rio Tinto's legal advisers are Linklaters LLP andMcCarthy Tetrault LLP. Alcan is being advised by Morgan Stanley, JP Morgan, UBS and RBC CapitalMarkets, and legal counsel are Ogilvy Renault LLP and Sullivan & Cromwell LLP. Webcast details There will be a presentation for analysts and investors in UK/Europe/Australiaat 10.00 BST which will be webcast live on Rio Tinto's website atwww.riotinto.com There will also be a presentation for analysts and investors in North America at15.30 BST / 10.30 EST which will be webcast live on Rio Tinto's website atwww.riotinto.com Contacts Rio Tinto Media RelationsLondon AustraliaNick Cobban Ian HeadOffice: +44 (0) 20 8080 1305 Office: +61 (0) 3 9283 3620Mobile: +44 (0) 7920 041 003 Mobile: +61 (0) 408 360 101 Christina MillsOffice: +44 (0) 20 8080 1306 France Canada/ USATara Hopkins Louie Cononelos+ 33 1 41 05 44 57 Office: +1 514 239 4207 Mobile: +1 801 573 6737 Investor RelationsLondon AustraliaNigel Jones Dave SkinnerOffice: +44 (0) 20 7753 2401 Office: +61 (0) 3 9283 3628Mobile: +44 (0) 7917 227 365 Mobile: +61 (0) 408 335 309 David Ovington Susie CreswellOffice: +44 (0) 20 7753 2326 Office: +61 (0) 3 9283 3639Mobile: +44 (0) 7920 010978 Mobile: +61 (0) 418 933 792 Email: [email protected] Website: www.riotinto.com High resolution photographs available at: www.newscast.co.uk Alcan Media contact Anik MichaudOffice: +1 514 848 [email protected] Investor contact Ulf QuellmannOffice : +1 514 848 [email protected] Additional information IMPORTANT INFORMATION: Deutsche Bank AG is authorised under German Banking Law (competent authority:BaFin - Federal Financial Supervising Authority) and with respect to UKcommodity derivatives business by the Financial Services Authority; regulated bythe Financial Services Authority for the conduct of UK business. Deutsche BankAG is acting exclusively for Rio Tinto plc and no one else in connection withthe Alcan acquisition and will not be responsible to anyone other than Rio Tintoplc for providing the protections afforded to clients of Deutsche Bank or forproviding advice in relation to the Alcan acquisition and/or any other matterreferred to in this announcement. CIBC World Markets Inc. is acting exclusively for Rio Tinto in connection withthe Alcan acquisition and will not be responsible to anyone other than Rio Tintofor providing advice in relation to the Alcan acquisition and/ or any othermatter referred to in this announcement. CIBC World markets plc, an affiliate ofCIBC World Markets Inc., is authorised and regulated by the Financial ServicesAuthority of the United Kingdom. The offer to purchase all of the issued and outstanding common shares of Alcan(the "Offer") is being made by Rio Tinto Canada Holding Inc. (the "Offeror"), awholly-owned indirect subsidiary of Rio Tinto. This announcement is for information purposes only and does not constitute orform part of any offer or invitation to purchase, otherwise acquire, subscribefor, sell, otherwise dispose of or issue, or any solicitation of any offer tosell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for,any security. The Offer (as the same may be varied or extended in accordancewith applicable law) will be made exclusively by means of, and subject to theterms and conditions set out in, the offer and takeover bid circular to bedelivered to Alcan and filed with Canadian provincial securities regulators andthe United States Securities and Exchange Commission (the "SEC") and mailed toAlcan shareholders. The release, publication or distribution of this announcement in certainjurisdictions may be restricted by law and therefore persons in suchjurisdictions into which this announcement is released, published or distributedshould inform themselves about and observe such restrictions. In connection with the Offer, Rio Tinto will be filing with the Canadiansecurities regulatory authorities and the SEC an offer and takeover bid circularas well as ancillary documents such as a letter of transmittal and a notice ofguaranteed delivery and Alcan is expected to file a directors' circular withrespect to the Offer. Rio Tinto will also file with the SEC a Tender Offerstatement on Schedule TO (the "Schedule TO") and Alcan is expected to file withthe SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule14D-9"). SHAREHOLDERS OF ALCAN ARE URGED TO READ THE OFFER AND TAKEOVER BIDCIRCULAR (INCLUDING THE LETTER OF TRANSMITTAL AND NOTICE OF GUARANTEEDDELIVERY), THE SCHEDULE TO (INCLUDING THE OFFER AND TAKEOVER BID CIRCULAR,LETTER OF TRANSMITTAL AND RELATED TENDER OFFER DOCUMENTS) AND THE SCHEDULE 14D-9AS THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE OFFER. The offer and takeover bid circular as well as other materials filed with theCanadian securities regulatory authorities will be available electronicallywithout charge at www.sedar.com. The Schedule TO and the Schedule 14D-9 will beavailable electronically without charge at the SEC's website, www.sec.gov, afterthey have been filed. Materials filed with the SEC or the Canadian securitiesregulatory authorities may also be obtained without charge at Rio Tinto'swebsite, www.riotinto.com While the Offer is being made to all holders of Alcan common shares, thisannouncement does not constitute an offer or a solicitation in any jurisdictionin which such offer or solicitation is unlawful. The Offer is not being made in,nor will deposits be accepted in, any jurisdiction in which the making oracceptance thereof would not be in compliance with the laws of suchjurisdiction. However, Rio Tinto may, in its sole discretion, take such actionas they may deem necessary to extend the Offer in any such jurisdiction. Forward looking statements This announcement contains statements which constitute "forward-lookingstatements" about Rio Tinto and Alcan. Such statements include, but are notlimited to, statements with regard to the outcome of the proposed Offer, anystatements about cost synergies, revenue benefits or integration costs,capacity, future production and grades, projections for sales growth, estimatedrevenues and reserves, targets for cost savings, the construction cost of newprojects, projected capital expenditures, the timing of new projects, futurecash flow and debt levels, the outlook for minerals and metals prices, theoutlook for economic recovery and trends in the trading environment and may be(but are not necessarily) identified by the use of phrases such as "will", "intend", "estimate", "expect", "anticipate", "believe" and "envisage". By theirnature, forward-looking statements involve risk and uncertainty because theyrelate to events and depend on circumstances that will occur in the future andmay be outside the control of Rio Tinto or Alcan. Actual results anddevelopments may differ materially from those expressed or implied in suchstatements because of a number of factors, including the outcome of the proposedOffer, revenue benefits and cost synergies being lower than expected,integration costs being higher than expected, levels of demand and marketprices, the ability to produce and transport products profitably, the impact offoreign currency exchange rates on market prices and operating costs,operational problems, political uncertainty and economic conditions in relevantareas of the world, the actions of competitors, activities by governmentalauthorities such as changes in taxation or regulation and such other riskfactors identified in Rio Tinto's most recent Annual Report on Form 20-F filedwith the SEC or Form 6-Ks furnished to the SEC or Alcan's most recent periodicand current reports on Form 10-K, 10-Q or 8-K filed with the SEC (as the casemay be). Forward-looking statements should, therefore, be construed in light ofsuch risk factors and undue reliance should not be placed on forward-lookingstatements. Nothing in this announcement should be interpreted to mean that the futureearnings per share of Rio Tinto will necessarily match or exceed its historicalpublished earnings per share. Other than in accordance with their legal and regulatory obligations (including,in the case of Rio Tinto, under the UK Listing Rules and the Disclosure andTransparency Rules of the Financial Services Authority), neither Rio Tinto norAlcan is under any obligation and each of Rio Tinto and Alcan expressly disclaimany intention or obligation to update or revise any forward-looking statements,whether as a result of new information, future events or otherwise. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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