But optimism seeps in when considered that while cultural synergy has been one of the primary reasons why many mergers have bombed, the Rio Tinto & Alcan Canadian combination seems 
much more ‘culturally fi t’ than the American Alcoa’s combination with Canadian Alcan, thus giving the merger a much better chance of survival. Also the fact that the target Alcan controls 20% of global aluminium market & that the merger with Rio Tinto is expected to boost the combination’s pro-forma gearing (debt to capital ratio) in the region of 60%, the deal appears refreshing as a Rio Tinto spokeswoman revealed exclusively to B&E, “We intend to retain our ‘A’ rating & will reduce gearing, partly through cash flows, currently running at more than $1 billion a month & rest through divestments of non-core business.”
However, go by Credit Suisse’s 2007 review which states that ‘Aluminum has been the worst-performing base metal in the last five years.’ And London Metal Exchange’s prediction of a dangerous drop in global aluminum consumption from 6.57% during 2005-06 to just 5.34% by 2012, & you’re bound to question Rio Tinto’s ‘expensive’ thoughts & its logic behind overvaluing Alcan, just as we do.
much more ‘culturally fi t’ than the American Alcoa’s combination with Canadian Alcan, thus giving the merger a much better chance of survival. Also the fact that the target Alcan controls 20% of global aluminium market & that the merger with Rio Tinto is expected to boost the combination’s pro-forma gearing (debt to capital ratio) in the region of 60%, the deal appears refreshing as a Rio Tinto spokeswoman revealed exclusively to B&E, “We intend to retain our ‘A’ rating & will reduce gearing, partly through cash flows, currently running at more than $1 billion a month & rest through divestments of non-core business.”However, go by Credit Suisse’s 2007 review which states that ‘Aluminum has been the worst-performing base metal in the last five years.’ And London Metal Exchange’s prediction of a dangerous drop in global aluminum consumption from 6.57% during 2005-06 to just 5.34% by 2012, & you’re bound to question Rio Tinto’s ‘expensive’ thoughts & its logic behind overvaluing Alcan, just as we do.
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Source: IIPM Editorial, 2008
An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
Source: IIPM Editorial, 2008
An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
