Kaiser May Embark On Proxy Fight Deadline Looms In Company’s Effort To Woo Reluctant Rival

Kaiser Aluminum Corp. today could launch a bloody takeover battle for competitor Alumax Inc. by attempting to vote its chairman out of office.

While declining Thursday to discuss its exact strategy, Spokane’s largest manufacturer said that it faces a Saturday deadline from Alumax to submit a shareholder resolution that could be placed on the ballot for the company’s May 2 annual meeting.

The resolution would be the first step toward replacing three of Alumax’ nine directors, including chairman Allen Born.

Until now, Houston-based Kaiser has resisted a so-called proxy fight to replace directors and crush Alumax’ resistance to Kaiser’s unsolicited offer. It had hoped that Georgia-based Alumax, an aluminum maker that’s larger than Kaiser, would negotiate on Kaiser’s offer to buy the company for $2.2 to $2.5 billion.

Alumax says Kaiser lacks shareholder support to wage a hostile takeover.

“Each company is trying to convince investors of the pros and cons of the deal,” said analyst Vahid Fathi, who tracks the companies for Everen Securities in Chicago. “But at the end of the day, shareholders ultimately will make the decision.”

The 62-year-old Born has been the loudest critic and most formidable barrier to Kaiser’s play on Alumax. Born calls Kaiser’s offer “inadequate” and questions the motives of Kaiser’s largest shareholder, corporate raider Charles Hurwitz.

Born is considered the force behind Alumax’ success, and a leader in the aluminum industry. He is chairman of The Aluminum Association, a powerful Washington, D.C., lobbying group.

The offer, which Kaiser announced Feb. 22, would combine two of the five-largest aluminum companies in the world, boasting $5 billion in annual revenue and 25,000 employees. Kaiser employs 2,600 people at the Trentwood rolling mill and Mead smelter.

Kaiser, which holds a minority interest in Alumax stock, needs the support of major stockholders to pull off a proxy fight. Some shareholders hold stock in both companies, but Kaiser said it did not know how much.

Kaiser, which held meetings this week in New York and Boston, said shareholders showed support for its offer.

But Glen Lewy, Alumax’ New York investment banker, said most investors are skeptical.

Many of the synergies Kaiser lauds in the deal are exaggerated, he said. For instance, Kaiser says Alumax would benefit from access to Kaiser’s huge production of alumina, a white powder used to make primary aluminum.

But Alumax already has low-cost contracts to buy alumina from Aluminum Co. of America through the year 2018.

“Maybe there’s an opportunity to be gained in a merger in 2019, but that’s a little beyond our current projection model,” said Lewy, vice chairman of James D. Wolfensohn.

Analyst Fathi disagrees. He argues that Alumax may be letting pride get in the way of an important deal.

“In this industry, companies have no choice but to get more dominant,” he said. “This combination would create that dominance.”

Analysts said Alumax may be seeking another suitor who could beat Kaiser’s offer of $40 to $45 a share. Lewy denied the rumors.

Fathi estimates Alumax is worth $48 per share, and Born has indicated he would consider $50 per share.

Wall Street, however, is not confident of a merger. Alumax shares Thursday closed up 37.5 cents at $36.375, far below Kaiser’s bid. Kaiser closed at $15.125, up 50 cents.

, DataTimes