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. Last Updated: 07/27/2016

Merger to Create World's Largest Aluminium Firm

ZURICH, Switzerland -- Three huge metal companies announced Wednesday that they were to merge in a deal to create the world's largest aluminum company.

The deal will see Alcan Aluminium of Canada, Pechiney of France and Zurich-based Alusuisse-Lonza, or Algroup, join together to take over from U.S. firm Alcoa as the world leader in aluminum. The three companies are expected to have combined sales revenues of $21.6 million per year.

The merged company will provisionally be called Alcan-Pechiney-Algroup, or APA, and will be directed from New York but registered in Montreal. Alcan boss Jacques Bougie will be chief executive officer.

In a statement issued in Zurich, the companies said Algroup's Lonza chemicals operation would be de-merged to create Lonza Group Ltd., which would have 400 million Swiss francs ($268 million) cash at inception.

The statement said the merger would come in the form of a share swap arrangement, with Alcan shareholders receiving 44 percent of shares in the new company, Pechiney 29 percent and Algroup 27 percent.

Algroup CEO Sergio Marchionne told reporters he expected to see a 5 percent cut in overall staff numbers - about 4,550 of the companies' combined staff of 91,000.

The statement said the new company expected to achieve $600 million in yearly savings within two years.

Pechiney chairman Jean-Pierre Rodier said the companies had had preliminary contact with European Union competition authorities and he expected a decision in the last quarter of 1999.

"I am highly confident that we'll go through this process in due time," he said.

Pechiney shares rose 9.9 percent in early trading on the Paris Bourse after the company said it will pay its shareholders an exceptional dividend of $550 million, or $6.77 per share, if the deal succeeds.

Algroup shares on the Zurich Stock Exchange fell 3.5 percent on profit-taking following the stock's 3.7 percent rise Tuesday. There was also disappointment with the company's first-half 1999 results, which showed a 4 percent drop in sales.

The news of the merger came the day after the three companies announced they were in "advanced discussions."

In March, Algroup pulled out of a planned merger with German industrial concern Viag following bitter disagreements over share swap arrangements.

Montreal-based Alcan is the world's second largest producer of aluminum. It recorded sales of $7.8 billion last year and has a worldwide capacity of 1.6 million tons of primary aluminum per year.