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Justice OKs Alcoa deal
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June 16, 1998: 8:58 a.m. ET
Antitrust officials approve $3.8B buyout of Alumax, with conditions
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NEW YORK (CNNfn) - The U.S. Justice Department has agreed to allow Aluminum Company of America to proceed with its $3.8 billion acquisition of Alumax, but only after Alcoa agreed to divest its dominant cast-plate operations.
Shares of Alcoa (AA) ended down 1-1/4 at 63-3/4 Monday, a 52-week low. Alumax (AMX) stock eased 13/16 to 45-3/8.
(See Alcoa's one-year intraday stock chart)
In March, Pittsburgh, Pa.-based Alcoa, the world's leading aluminum maker, announced plans to buy Atlanta-based Alumax, the third-ranked company, for $2.8 billion in stock and cash plus the assumption of $1 billion of Alumax debt.
(See Alumax's one-year intraday stock chart)
In a subsequent probe of the deal, Justice officials found that the two firms together produce 90 percent of the worldwide market for cast plate, a flat aluminum product that resists warping.
Cast plate is used in machinery that makes products for packaging frozen foods and for precision automotive and aircraft parts.
The Justice officials said the firms, as two of only three companies that produce cast plate and fierce competitors themselves, would effectively eliminate competition as a combined entity. The Department argued in a federal court complaint that welding Alcoa and Alumax together without ensuring the prior spin-off of certain divisions would have led to lower quality and higher prices for consumers.
Under the proposed settlement, Alcoa, with annual sales of more than $13 billion, will sell its Vernon, Calif., plant that produces cast plate. Alumax has $3 billion in annual sales.
Alcoa earlier abandoned plans to acquire parts of Alabama-based Reynolds Metals Co. after antitrust investigators blocked that buyout.
Even with the conditions, soldering Alcoa and Alumax will spawn a packaging powerhouse with a vast global presence. Alcoa already has operations in 28 countries and holds investments in Eastern Europe and Latin America. 
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