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Reynolds rejects Alcoa
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August 15, 1999: 7:35 p.m. ET
Board of directors calls Alcoa's $5.6B offer 'inadequate'
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NEW YORK (CNNfn) - The board of directors of Reynolds Metals Co. voted unanimously Sunday to reject Alcoa Inc.'s $5.6 billion offer for the company, but left itself open to a new bid from Alcoa or another suitor.
In a statement released Sunday following a special meeting of the board, Reynolds called the Alcoa bid "inadequate." But Reynolds also said it would "explore all alternatives," including the sale of the company.
A Reynolds spokesperson declined to elaborate on the statement. Alcoa could not be reached for comment.
A successful purchase of Richmond, Va.-based Reynolds, the maker of Reynolds Wrap aluminum foil, would allow Alcoa to retain its spot as the biggest producer of the commodity.
Takeover experts had expected Reynolds' action, predicting that the company would reject the offer and position itself to receive a higher bid, either from Alcoa or another company.
The Reynolds' board's rejection of Alcoa, and its decision to "explore" a sale, is likely to intensify what is rapidly becoming a bidding war for the aluminum company.
On Friday, a Chicago-based investment firm announced plans to make its own bid for Reynolds, the third-largest aluminum producer in the world.
McCook Metals LLC, a unit of investment group Michigan Avenue Partners, Friday delivered a letter to Reynolds "expressing an interest in an all-cash acquisition of Reynolds if Reynolds were for sale."
Details of the offer were not available but Michigan Avenue Chairman Michael Lynch told CNNfn his firm is prepared to top the bid from Pittsburgh-based Alcoa.
A bidding war
On Wednesday, Alcoa offered the equivalent of $65 a share, or $4.2 billion, in cash and stock, plus the assumption of $1.4 billion in debt, for Reynolds (RLM). Alcoa 's (AA) offer was unveiled just hours after Canada's Alcan Aluminium Ltd. (AL), France's Pechiney SA (PY) and Switzerland's Algroup announced their widely expected merger.
Alcan-Pechiney-Algroup -- as it will be known at first - was expected to be the top maker of packaging products and be neck-and-neck with Alcoa, currently the world's biggest aluminum producer. But a merged Alcoa-Reynolds would leapfrog past A-P-A in both aluminum output and market capitalization.
Rumors of the second offer sent shares of Reynolds soaring 3 to 69-3/8, a gain of almost 5 percent from Thursday's close. Shares of Alcoa fell 1-1/4, to 66-1/2, in trading Friday on the NYSE.
Reynolds' share price during the past week
Who is next?
At least one major Reynolds shareholder has been putting pressure on the company to seek a sale. In letters to the board last week, Richard Grubman, the managing director of Highfields Capital Management LP, which holds 4.3 million Reynolds shares, or 6.7 percent, asked the company to auction itself to the highest bidder.
The rejection of the Alcoa bid increases the likelihood that a third party will now join the battle for Reynolds. Swiss aluminum company Alusuisse-Lonza Holding AG has publicly stated that it may be interested in pursuing Reynolds. 
-- from staff and wire reports
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