Kaiser Aluminum Corp., a huge Spokane County employer controlled by a renowned hostile takeover expert, has launched a bid to acquire a major competitor.
Executives at Norcross, Ga.-based Alumax Inc. flatly rejected the unsolicited offer, which Kaiser said it made Feb. 8.
But Houston-based Kaiser moved Thursday to put pressure on Alumax to reconsider the offer of more than $2 billion by making its plan public.
The deal offers Alumax shareholders $40 to $45 per share in cash and stock, a premium of 23 percent above Thursday’s closing price of $32.50 a share.
“We think there’s great synergy between the two companies,” Kaiser Chairman George Haymaker Jr. said in a telephone interview. “When we put them together, we’ll be much more competitive.”
Alumax officials were unavailable for comment.
The offer appears to be a generous one for Alumax shareholders, and a takeover could strengthen Kaiser’s competitive position in the world aluminum market.
But Haymaker said it would have little effect on workers at the Inland Northwest’s largest manufacturer.
Spokane, home to the Trentwood rolling mill and Mead smelter, boasts Kaiser’s largest concentration of workers - a total 2,600.
The deal could weaken the solidarity of the United Steelworkers of America. Several different unions represent workers at Alumax factories in South Carolina, Maryland and Ferndale, Wash., whereas the Steelworkers represent workers at all five of Kaiser’s major U.S. factories.
Combining Kaiser and Alumax would create the world’s third-largest producer of aluminum behind Aluminum Company of America and Alcan Aluminum Ltd. in Canada, Kaiser said. Based on total revenue from all products, the combined company would be North America’s fourth-largest aluminum maker and control more than $5 billion in assets. The two companies employ about 23,000 people.
Kaiser itself was taken over in 1988 in a leveraged buyout by Maxxam Inc. and Charles Hurwitz, chief executive officer. Maxxam owns 62 percent of Kaiser.
Haymaker said the offer to buy Alumax was not Hurwitz’ idea, but was reached after Kaiser completed a lengthy study of merging with several companies.
Both companies have some common shareholders, including Fidelity Management & Research Corp., manager of the behemoth Fidelity family of mutual funds.
Kaiser would pay $2.2 billion to $2.5 billion for the 55 million common shares of Alumax.
“It sounds like a big number but this is a transaction that certainly can be financed,” said Haymaker. Kaiser for years struggled under huge debts that Hurwitz and Maxxam saddled it with after the takeover.
Several banks have agreed to provide financing, Haymaker said, but he declined to name them. Kaiser currently has $750 million in debt.
Kaiser made the announcement after the stock market closed Thursday, with Kaiser trading $14.12-1/2
Kaiser’s bid for Alumax comes only weeks after the company reported its first annual profit in years. The company in 1995 earned a $60.3 million profit, a striking improvement from the $106.8 million loss of the previous year.
Anthony Rizzuto Jr., a securities analyst who follows Kaiser and Alumax for Bear Stearns & Co. in New York, said he’s been arguing for consolidation in the aluminum industry for years. And the Kaiser-Alumax deal makes sense, he said.
“Looking at the merits of combination, this one has logic,” Rizzuto said. “It gives Kaiser nice exposure to a wide range of products and markets.”
Other synergies that analysts and Kaiser said would make the combined company stronger include:
Kaiser is the second-largest supplier of alumina, which is used to make aluminum, while Alumax is the third-largest customer of the raw product.
Kaiser specializes in aluminum for beverage cans and the aerospace industry; Alumax specializes in products for automobiles and trucks.
Alumax is developing a foil mill in China; Kaiser is upgrading smelters and has joint ventures for aluminum extrusion in the country.