In July 2007, when Rio Tinto(RIO) announced it would be purchasing Alcan for $38.1 billion in the largest mining acquisition ever, new CEO Tom Albanese was ecstatic. His bold move, beating out a $27 billion hostile bid from former Alcan parent Alcoa(AA) proved disastrous. Earlier this year, Albanese was forced to resign after writing down over $25 billion of the purchase price. Albanese had bought at the top of the cycle and paid a rich premium. Albanese had tried to sell off pieces of Alcan, some successfully. One piece which he was unable to sell was Pacific Aluminium, which the company has now folded back into Alcan. The move has fueled speculation that new CEO Sam Walsh is preparing to spin off Alcan and fully reverse this awful transaction. Mr. Walsh has not commented on the company’s plans for its aluminum business. One wonders whether Alcoa, which was saved from its own disastrous purchase by Alcan’s board and Rio’s higher bid, might have renewed interest in these assets at a more reasonable price.
Disclosure: The author holds no position in any stock mentioned, but uses too much aluminum foil
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