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Aluminum firms talk merger
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August 10, 1999: 10:54 a.m. ET
Alcan, Pechiney and AluSuisse discuss three-way tie to create world leader
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LONDON (CNNfn) - Three of the world's largest aluminum and packaging makers are holding merger talks that could create a global leader with sales of more than $20 billion.
Switzerland's AluSuisse Lonza, France's Pechiney and Canada's Alcan confirmed Tuesday they are in three-way talks. The Swiss firm said there is "no certainty" the talks would lead to a concrete agreement, but a spokesman did say a statement could come later Tuesday or Wednesday.
Analysts cautioned that an eventual deal more likely would involve an exchange of assets as the companies seek to reposition their core businesses. "This is far from a known quantity," said Russell Skirrow, analyst at Merrill Lynch in London.
"There have been rumors in the markets for months and this could be a casual relationship, a full-blown marriage or, worse, a ménage a trois," he said.
The merger option would catapult the enlarged firm past U.S.-based Alcoa to become the world's largest aluminum concern and a major force in the global packaging industry.
Alcan and Pechiney are the world's second- and fourth-largest producers, respectively, while the Swiss firm also has substantial packaging and chemical operations.
The potential deal is being billed as a merger of equals in which Alcan would remain the listed firm. If completed, it also would be the first three-way cross-border merger among firms on either side of the Atlantic.
Alcan had 1998 sales of $7.79 billion and AluSuisse sales were 8.58 billion Swiss francs ($5.74 billion), which would take the enlarged group past the $15.3 billion chalked up last year by Alcoa (AA).
Pressure for consolidation in the sector has been driven by a slump in aluminum prices, in line with a decline in global commodity prices.
A year ago, Alcoa paid $3.8 billion for Alumax, the fourth-largest producer in the United States. And in June, British Steel and Dutch aluminum and steel producer Hoogovens announced plans to merge, creating Europe's largest steel producer.
Alcoa's recent acquisitions in Europe, notably in Italy and Spain, have put pressure on its competitors to take action, and the U.S. company announced a further deal Tuesday in Turkey.
"The commodities sector is still under pressure. Companies aren't going to go to the wall or close down, so consolidation makes a lot of sense," one investment banker told Reuters.
AluSuisse, which is controlled by the influential Swiss financier Martin Ebner, has been looking to sell its aluminum holdings after a planned merger with the German conglomerate Viag (FVIA) collapsed earlier this year.
Shares of Pechiney, the largest of the three firms with 1998 sales of 9.84 billion euros ($10.5 billion), have soared 20 percent since the start of August amid speculation that it would continue to refocus on core aluminum production and packaging.
The French group floated its soft-drink canning business, American National Can (CAN), in New York last month.
Pechiney (PPEC) shares were flat in late Tuesday afternoon trading in Paris at 51.80 euros, while AluSuisse shares jumped 3.4 percent to 1,804 Swiss francs.
The merger talk boosted other stocks in the sector, with Billiton (BLT), the global number five aluminum maker, up 1 percent at 267.50 pence in London. 
--from staff and wire reports
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