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. Last Updated: 07/27/2016

Alcoa Wins $4.4Bln Bid to Buy Reynolds

PITTSBURGH -- Alcoa, the world's largest aluminum maker, has won its hostile bid for world No. 3 Reynolds Metals Inc., reaching an agreement to acquire the company for $4.4 billion in stock.

Pittsburgh-based Alcoa beat out Chicago-based investment group Michigan Avenue Partners in the bidding for the Richmond, Virginia-based Reynolds.

The Reynolds board had rejected a $65-a-share cash-and-stock bid from Alcoa on Sunday, saying it was not good enough. Alcoa then began taking a $65-a-share all-cash bid to shareholders while pursuing the talks that led to the merger agreement.

The agreement announced by both companies Thursday values Reynolds at $70.88 3/4 a share, based on Wednesday's closing price of Alcoa. That represents a premium of 3.9 percent on Reynolds' closing price Wednesday and is 9 percent more than last week's bid of $65.

It would create a company with annual sales of $20.5 billion, about 120,000 employees and operations in more than 300 locations in 36 countries. Analysts say a combined Alcoa and Reynolds would control more than one-sixth of world aluminum production.

"The new company will be better positioned to address the ongoing globalization of the metals industry and the new competitive landscape this is creating," said Alain Belda, Alcoa president and chief executive officer. "It will permit the greater efficiencies and cost reductions required by an environment that has seen the lowest prices in many years for our commodity products."

The merger of the two industry giants could face a tough antitrust review, but Alcoa and Reynolds said they hope the takeover will be completed by year's end. Reynolds' shareholders also must approve the deal.

Another potential suitor for Reynolds was Alcan Aluminium Ltd. of Canada, the world's second-largest aluminum producer. But Alcan said it was not interested in bidding for all of Reynolds because it is in the midst of a merger with Alusuisse-Lonza Holding (Algroup) of Switzerland and Pechiney SA of France.

That international combination would challenge Alcoa for industry leadership with about $21 billion in sales.

The aluminum industry is consolidating following a devastating decade. The collapse of the Soviet Union, one of the biggest aluminum producers, caused Russian companies to flood the market with aluminum as they sought foreign currency, pushing prices down. The financial crisis in Asia, Russia and Latin America also depressed the market.Under the Alcoa-Reynolds merger agreement, Reynolds shareholders will receive 1.06 shares of Alcoa common stock for each share of Reynolds common stock.