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Alcan Aluminium Ltd., the world’s second-largest aluminum producer, scrapped its $7 billion takeover of French rival Pechiney SA after European antitrust officials opposed the plan, a person familiar with the talks said. The companies last month withdrew their plan from regulatory review after EU officials said the combined company would dominate output of flat-rolled aluminum used in cans and similar products.
The collapse of the talks will leave Pechiney isolated in a consolidating industry. Alcan will still pursue its takeover of Algroup, and the proposed $6.34 billion Alcoa Inc. takeover of Reynolds Metals Co. will clear antitrust hurdles, analysts said.
“Regardless of the outcome of the regulatory process in Brussels, the aluminum industry consolidation process will go on,” said Sergio Marchionne, chief executive of Algroup. He declined to comment specifically on the proposed combination of Alcan, Pechiney and Algroup to create a company called APA.
Negotiations broke down after Alcan refused to sell its 50% stake in the Aluminium Norf GmbH plant that manufactures rolled sheet products, the person familiar with the talks said. Equally, Pechiney had been unwilling to cede control of its Neuf-Brisach plant, also supplying rolled sheet, analysts said.
Pechiney initially can compete with its bigger rivals, though eventually the company will have to buy out smaller producers, find a suitable merger candidate or sell out, analysts said. Viag AG has said its VAW Aluminium Ltd. unit could be sold as it focuses on power, while Norsk Hydro ASA has said it wants to make acquisitions in the aluminum industry.
Alcan is legally bound to takeover Algroup, analysts say, although it may have to renegotiate the price or consider selling parts of the company.
Alcan and Algroup announced on March 14 that they would proceed with their combination. The proposed three-way combination was first announced August 11, 1999.