At the risk of hyperbole, I've never seen a potential corporate combination with more moving parts than Alcoa's (NYSE: AA ) attempt to take over Alcan (NYSE: AL ) .
On Monday, Pittsburgh-based Alcoa announced an offer of $26.9 billion for Canada's Alcan, its former sibling. The two were separated in 1950, primarily for antitrust reasons. The offer values Alcan stock at $73.25 a share, a 20% premium over its closing price on Friday. For every Alcan share, Alcoa would pay $58.60 in cash and 0.4108 of one of its own shares.
In some respects, the deal recalls copper producer Freeport McMoRan's (NYSE: FCX ) November quest for Phelps Dodge. While that offer ultimately proved successful, Freeport's bid seemed originally vulnerable to sweeter deals from bigger firms like Australian mining behemoth BHP Billiton (NYSE: BHP ) . Billiton is now mentioned as a possible interloper in the Alcoa-Alcan dance, as is huge London-based mining concern Rio Tinto PLC (NYSE: RTP ) .
At this early stage in the process, awaiting antitrust approval -- even a successful marriage would probably be subjected to more than six months' courtship -- the possible outcome could still be swayed by growing international aluminum production in places like Russia, China, and the Middle East. In addition, the companies' collective chances depend on the viability of substitutes for aluminum, such as carbon-fiber composites. And any takeover equation must also include access to natural gas, which has grown increasingly important in aluminum smelting. Of the two companies, Alcan generally enjoys far superior natural gas access.
But as a former analyst for a Canada-based investment bank, I'd argue that reaction north of the border will be most critical to the potential takeover's outcome. According to The Wall Street Journal, Canadian Liberal Party finance critic John McCallum has already said, "It's a bad day for Canada." (To soothe such concerns, Alcoa reportedly would maintain executive offices in both New York and Montreal.)
And alas, with Freeport and Phelps now put to bed -- figuratively, of course -- and Alcoa's offer getting all sorts of attention, it appears that steel producer Arcelor Mittal (NYSE: MT ) may be eyeing AK Steel (NYSE: AKS ) as well, in an apparent $4.5 billion combination. We'll keep our eyes on that one.
In the meantime, Fools should avoid jumping into the Alcoa-Alcan mating dance until it gets a bit more settled. Alcoa's offer is interesting but complicated, and it'll take a while for any related money-making opportunities to become apparent.
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions or comments. The Motley Fool has a disclosure policy.
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