Hostile Makeover

A hostile American bid for a sometimes reviled, sometimes beloved aluminum giant has stirred fears in the boardrooms and small towns of two Canadian provinces.

Alcoa Inc., an American aluminum behemoth, showed its colors on Monday when it offered $33-billion in an unsolicited bid for the Montreal based Alcan Inc.

For many, the announcement came as a surprise. But it can easily be explained, according to the Globe and Mail’s Konrad Yakabuski. “Alcoa's bid was spurred by a pending merger of Russian rivals that would push the U.S. firm out of the No. 1 spot in the global aluminum business,” he wrote.

If the takeover is successful, Alcan would be among several major Canadian firms swallowed by foreign companies in recent months. Montreal would also lose it’s place as Alcan’s corporate headquarters. Alcoa’s top executives – and the top decisions – would remain in New York.

The merger would certainly alter the importance of francophone Quebeckers at the senior management level – a source of pride in the province. It might even alter a century-old love affair between Quebec and the Canadian company.

Alcan, formerly a division of Alcoa, entered Canada in 1901, and later built an entire town in Saguenay, home to the world’s largest smelter. That was the start of long and successful relationship with the eastern province, leading to the creation of 10 smelters in the province. Quebec’s premier recently signed a long-term deal with the company for the creation of a new $2-billion smelter in Saguenay.

A similar deal has been signed in B.C.. But Alcan’s history in this province is more controversial. The town of Kitimat has fought the aluminum giant over power sales for years. On Tuesday, Kitimat Mayor Richard Wozney expressed fears that things would only get worse if the takeover is allowed to proceed.

But the chances of that happening seem dim, considering that Alcan’s shares skyrocketed after the announcement. The offer might, however, lead to further discussions, and perhaps a fusion of the two firms. Other players, based in Brazil, Russia, India or China, might also show interest. For Alcan, and other Canadian companies, the merging season has only begun.