Pechiney withdraws from aluminium mega-merger move

PARIS, APRIL 13. France's Pechiney SA said on Thursday it had scrapped plans to merge with Canada's Alcan and Switzerland's Algroup after Alcan's board decided not to sell a German aluminium plant to satisfy EU competition concerns.

The end of the three-way merger bid is a blow for the French group, which will now have to step back and reconsider its next move in the rapidly consolidating aluminium sector.

But analysts said it could ultimately prove more negative for Alcan, which initiated the three-way merger discussions and now finds itself with a much smaller prize.

Alcan and Algroup, which received a green light from the European Commission to merge last month, plan to go ahead with the smaller alliance and said that the deal would be completed through an exchange offer to Algroup shareholders.

"Alcan, Pechiney and Algroup announced today their decision not to proceed with the previously announced three-way merger among the companies and to terminate their combination agreement insofar as Pechiney is concerned," Pechiney said.

Pechiney's Chief Financial Officer said a decision by the Alcan's board not to sell its Norf unit in Germany had sealed the fate of the planned three-way merger, which would have created an aluminium giant with annual revenues of around $17 billion and a serious challenger to industry leader Alcoa of the U.S.

"We arrived at the conclusion that there could be no solution without the sale of Norf," Mr. Jean-Dominique Senard told Reuters in an interview. "We regret Alcan's decision not to sell it."

"For Pechiney it is a disappointment," said Mr. Christian Georges, analyst at Credit Lyonnais Securities. "But they are still well positioned in growth markets for aluminium and have a strong position in packaging in Europe."

Measured by rolling capacity, Pechiney would still be the number- three in the sector behind U.S. giant Alcoa, which is buying rival Reynolds Metals , and a combined Alcan-algroup.

Last month Pechiney withdrew an application for its merger with Alcan after failing to resolve competition concerns of the European Commission.

Since then it has been seeking to arrive at a solution that would satisfy the partners and regulatory authorities and had set an April 30 deadline to find a mutually acceptable deal.

But on Thursday, the groups said an agreement to satisfy all parties had been unworkable.

- Reuters

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