Filed by Alcoa Inc.
Pursuant to Rule 425
Under the Securities Act of 1933
Registration Statement:
333-142669
Subject Company: Alcan Inc.
Commission File No.:
001-03677
Merrill Lynch Global Metals & Mining Conference
Alcoa – The Momentum Continues
Dublin, Ireland 10 May 2007
Alain J. P. Belda
Chairman and Chief Executive Officer
Momentum Continues
Bloomberg ROC Trailing 12 Months
Including Growth Capex
14% 12% 10% 8% 6%
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07
7.8% 8.3% 8.3% 8.3% 9.7% 11.2% 12.2% 13.2% 12.7%
Bloomberg ROC Trailing 12 Months
Excluding Growth Capex
16% 14% 12% 10% 8% 6%
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07
8.4% 9.2% 9.3% 9.5% 11.2% 12.8% 14.1% 16.2% 15.6%
Cash from Operations
$ Million
$1,200
$1,000
$800
$600
$400
$200
$0
($200)
($400)
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07
(239) 383 493 1,039 (213) 699 748 1,333 527
Momentum Builders
Record 2006 Financial Performance
Disciplined Capital Management
Debt restructuring
2007 peak capital spending year
Shareholder return initiatives
Momentum Builders
Realization of the Growth Projects
Pinjarra refinery expansion
50% aerospace capacity increase
Russia and China rolling assets
Sao Luis refinery expansion
Juruti bauxite mine development
Iceland smelter
Momentum Builders
Continued Improvement in Downstream Performance
Consistent quarter over quarter improvement
Proprietary technology and unique equipment
Continued new product development
Significant investments in productive assets
Unique and proprietary products for growing end markets
North American Rolled Products
Revenue
250% 200% 150% 100% 50% 0%
‘02 ‘03 ‘04 ‘05 ‘06 ‘07 Q1 Annualized
100% 99% 112% 169% 199% 221%
2002 versus 1st Quarter 2007 Annualized
Annualized revenue up 121%
Higher volumes and improved customer mix
Profit After Tax Growth up 130%
250% 200% 150% 100% 50% 0%
‘02 ‘03 ‘04 ‘05 ‘06 ‘07 Q1 Annualized
100% 86% 79% 163% 179% 233%
Alcoa Power and Propulsion
Total Revenue
(Indexed 2003 = 100)
160 140 120 100 80 60 40 20 0
‘03 ‘04 ‘05 ‘06
13% CAGR
Operating Margin % of Revenue
(Indexed 2003=100)
200 180 160 140 120 100 80 60 40 20 0
‘03 ‘04 ‘05 ‘06 ‘07 Q1
87% Improvement
Revenue continues to grow
Q1 ‘07 up 10% vs. Q1 ‘06
Howmet aerospace sales up 52% since 2003
Well positioned on major engine programs
Share gains on high growth engines
Capturing growth in spares market
Incremental margin improving
Q1 ‘07 Operating Margin $ up 41% on a 10% increase in sales vs. Q1 ‘06
Offsetting pass through of escalating metal prices
Significant productivity gains via ABS
Q1’ 07 up 8% vs. Q1 ‘06
Alcoa Fastening Systems
Revenue
Indexed 2003=100
200 150 100 50 0
2003 2004 2005 2006
15% CAGR
Net Margin
Indexed 2003=100
300 200 100 0
2003 2004 2005 2006
Organic Growth Driven By:
Leadership Position in Fastening Systems Innovation & Development
Share Gain
Market Positioning
Profitability Growth Driven By:
Realignment of Manufacturing Facilities
Product Mix Enrichment
Productivity through ABS Deployment
Productivity through Advanced Technology
Raw Material & Energy Cost inflation passed on in pricing
Momentum Builders
Continued Portfolio Management
Sale of Alcoa Home Exteriors
Creation of a soft alloy extrusions joint venture
November 2006 downstream restructuring
Exploration of disposition of packaging assets
Strategic review of selected automotive businesses
Offer for Alcan
A Winning Strategic Combination
Creates the premier fully integrated aluminum company
Enhanced cash flow and $1 billion in annual synergies
Significant scale to compete in a changing environment
Optimized portfolio of upstream assets
Enhanced capacity for growth
Strong technology, operations and talent
Shared values and commitment to sustainability
Evolving Competitive Landscape
Industry Fundamentals
Aluminum consumption projected to double over 15 years
Emerging global competitors in Russia, China, India and the Middle East
Scale required to maintain competitiveness
Evolving end markets demanding product innovation
Keys to Success
Access to quality bauxite and alumina
Access to long-term, low cost energy
Innovation through world-class technology and R&D
Proven commitment to sustainability
Alcoa / Alcan well positioned to compete with large global peers and deliver profitable growth
Transforming Alumina Landscape
Significant Growth in the East
Alumina Capacity
1998
Total Market: 53 MMT
31%
Alcoa 23.2%
Reynolds 5.7%
Inespal 2.1%
China 6.8%
CIS 10.8%
E. Europe 3.9%
India 2.8%
South America 5.8%
Hydro 1%
VAW 1%
Comalco 3%
Other W. World 15%
Billiton 3.4%
16%
Alcan 9.8%
Pechiney 3.5%
Alusuisse 2.3%
2006
Total Market: 79 MMT
22%
Other China 9.8%
Alcoa 19.8%
Alcan 8.3%
BHP Billiton 5.6%
Hydro 2%
RTZ Comalco 4%
Other W. World 10%
CIS/E. Europe 5.1%
India 3.2%
South America 6.5%
Rusal 13.2%
Chalco 12.1%
Source: CRU Note: Percentages may not add to 100%
Transforming Aluminum Landscape
Significant Growth in the East
Aluminum Capacity
1998
Total Market: 25 MMT
18%
Reynolds 4.5%
Alumax 2.8%
Inespal 1.4%
China 10.4%
CIS 14.9%
E. Europe 1.9%
Middle East 3.6%
Hydro 3%
VAW 2%
Comalco 3%
Other W. World 29%
11 %
Billiton 4.2%
Alusuisse 1.1%
Pechiney 3.3%
Alcan 6.7%
Alcoa 8.9%
2006
Total Market: 39 MMT
30 %
Other China
21.0%
Alcoa 10.9%
Alcan 9.4%
BHP Billito 3.5%
Hydro 4%
RTZ Comalco 2%
Other W. World 16%
CIS/E. Europe 2.8%
India 2.1%
Middle East 4.2%
South America 3.9%
Rusal 10.3%
Chalco 9.2%
World-Class Bauxite & Alumina Franchise
Alumina Refinery Cash Costs ($/MT)
Alcan Average 38th Percentile
Alcoa Average 66th Percentile
2006 Cost Curve
450 400 350 300 250 200 150 100 500 0
10,000 20,000 30,000 40,000 50,000 60,000 70,000
Worldwide Production—000 MT
2006 Refining Capacity (kMT)
25,000 20,000 15,000 10,000 5,000 0
21,524 16,490 15,617 6,926 10,443 5,907 9,564 4,448 2,930 2,269
Alcoa/Alcan China Chalco Alcoa UC Rusal Other China Alcan BHP Rio CVRD
Global supplier with premier facilities
Low cost production base—majority of production in bottom half of cost curve
Best in class operational expertise and technology
Investing in high return growth projects
Bauxite & Alumina
2006 ($Millions)
Total Revenue
4,929 3,845
EBITDA
1,670 609
Combined
8,774 2,279
Source: CRU full operating cost, Alcoa analysis; Company filings
Attractive Smelter Portfolio
Aluminum Smelter Cash Costs ($/MT)
Alcoa Average 51st Percentile
Alcan Average 34th Percentile
2006 Cost Curve
3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 0
5,000 10,000 15,000 20,000 25,000 30,000
Worldwide Production—000 MT
2006 Smelting Capacity (kMT)
11,630 7,788 8,096 4,370 3,985 3,418 1,683 3,534 1,364 855 853 771
14,000 12,000 10,000 8,000 6,000 4,000 2,000 0
China Alcoa/Alcan Chalco Alcoa UCRusal Other China Alcan Hydro BHP Alba Rio Dubal
Global supplier with premier facilities
Low cost production base
Best in class operational expertise and technology
88% of power requirement self-generated or under long-term contracts
Investing in high return growth projects
Primary Metals
2006 ($Millions)
Combined
23,526 5,843
Total Revenue 12,379 11,147
EBITDA 2,881 2,962
Source: CRU full operating cost, Alcoa analysis; Company filings
Access to Long-Term, Low Cost Energy
Alcoa – Type
Short-term
Self-generation
18% 21% 61%
Long-term
Alcan—Type
Short-term
Self-generation
5% 50% 45%
Long-term
Alcoa/Alcan—Type
Short-term
Self-generation
12% 34% 54%
Long-term
Alcoa/Alcan—Source
46% Other
54% Hydro
34% power self-generated; 54% under long-term contract
54% of power from renewable hydro
Source: Company filings and reports; CRU; Alcoa analysis
Global Growth Opportunities
North Iceland Isal Kitimat Quebec Ningxia Saudi Arabia Jamalco Guinea
Trinidad Sohar I Vietnam Ghana Sohar II Suriname Brunei Juruti Sao Luis
Alcoa Gove Madagascar Alcan Shared Coega Wagerup Refinery Victoria Ops
Smelter Mine
Source: Company filings and press releases
Increased Commitment to Canada
The Global Primary Products business headquartered in Montreal will be one of the largest companies in Canada
Dual headquarters in Montreal and New York
Strategic management functions in each city
Significant Canadian Board representation
Alumina and Primary Metals business based in Montreal
Would be the largest aluminum company in the World
$32.3 billion in total revenue
38,000 employees operating in 29 countries
Headquarters of Global Growth group – decision-making centered in Quebec
Quebec becomes center of aluminum innovation
Alcan AP50 carbon smelting technology at the Complexe Jonquiere
Alcoa post carbon “inert anode” technology pilot deployment in Quebec
Corporate Presence
Global Business
R&D Center
Regulatory Approvals
The industry has changed significantly with emerging global players in Russia, China, India and the Middle East who are quickly expanding and adding capacity
We have carefully considered the regulatory approvals
We are prepared to make the necessary targeted divestitures in the appropriate industry segments
We are already in contact with several regulatory agencies
We are confident that the transaction will be approved
Shareholder Value Creation
For Alcoa Shareholders
EPS accretive within first year
Cash flow per share accretive within first year
$1 billion in synergies
Greater linkage to a strong aluminum market
Increased profitable growth opportunities
Improved risk profile
For Alcan Shareholders
Immediate realization of significant premium
Compelling cash value up front
Participate in value creation through achieved synergies
Ownership in the industry leader
History of Successful Integration and Synergy Realization
(US$ in mm)
Alcoa Acquisitions
Alumax
Size: $3,800 Revenue: $3,004 Synergies: $110 % of Revenue: 3.7%
Reynolds
Size: $5,900 Revenue: $5,047 Synergies: $288 % of Revenue: 5.7%
Cordant
Size: $3,300 Revenue: $2,541 Synergies: $141 % of Revenue: 5.6%
Fairchild
Size: $650 Revenue: $571 Synergies: $67 % of Revenue: 11.7%
Ivex
Size: $790 Revenue: $643 Synergies: $34 % of Revenue: 5.3%
Alcan
Size: $ 33,200
Revenue: $ 23,641
Synergies: $ 1,000
% of Revenue: 4.2%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Algroup
Size: $4,500 Revenue: $5,146 Synergies: $200 % of Revenue: 3.9%
Pechiney
Size: $6,400 Revenue: $12,766 Synergies: $400 % of Revenue: 3.1%
Alcan Acquisitions
Note: % of sales represents synergies achieved as % of last twelve months revenue at time of transaction Note: Size represents transaction size Source: Company filings and press releases
A Winning Strategic Combination
Creates the premier fully integrated aluminum company
Enhanced cash flow and $1 billion in annual synergies
Significant scale to compete in a changing environment
Optimized portfolio of upstream assets
Enhanced capacity for growth
Strong technology, operations and talent
Shared values and commitment to sustainability
ALCOA
Forward-Looking Statements
Certain statements and assumptions in this communication contain or are based on “forward-looking” information and involve risks and uncertainties. Forward-looking statements may be identified by their use of words like “anticipates,” “believes,” “estimates,” “expects,” “hopes,” “targets,” “should,” “will,” “will likely result,” “forecast,” “outlook,” “projects” or other words of similar meaning. Such forward-looking information includes, without limitation, the statements as to the impact of the proposed acquisition on revenues, costs and earnings. Such forward looking statements are subject to numerous assumptions, uncertainties and risks, many of which are outside of Alcoa’s control. Accordingly, actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this communication. These risks and uncertainties include Alcoa’s ability to successfully integrate the operations of Alcan; the outcome of contingencies including litigation, environmental remediation, divestitures of businesses, and anticipated costs of capital investments; general business and economic conditions; interest rates; the supply and demand for, deliveries of, and the prices and price volatility of primary aluminum, fabricated aluminum, and alumina produced by Alcoa and Alcan; the timing of the receipt of regulatory and governmental approvals necessary to complete the acquisition of Alcan and any undertakings agreed to in connection with the receipt of such regulatory and governmental approvals; the timing of receipt of regulatory and governmental approvals for Alcoa’s and Alcan’s development projects and other operations; the availability of financing to refinance indebtedness incurred in connection with the acquisition of Alcan on reasonable terms; the availability of financing for Alcoa’s and Alcan’s development projects on reasonable terms; Alcoa’s and Alcan’s respective costs of production and their respective production and productivity levels, as well as those of their competitors; energy costs; Alcoa’s and Alcan’s ability to secure adequate transportation for their respective products, to procure mining equipment and operating supplies in sufficient quantities and on a timely basis, and to attract and retain skilled staff; the impact of changes in foreign currency exchange rates on Alcoa’s and Alcan’s costs and results, particularly the Canadian dollar, Euro, and Australian dollar, may affect profitability as some important raw materials are purchased in other currencies, while products generally are sold in U.S. dollars; engineering and construction timetables and capital costs for Alcoa’s and Alcan’s development and expansion projects; market competition; tax benefits and tax rates; the outcome of negotiations with key customers; the resolution of environmental and other proceedings or disputes; and Alcoa’s and Alcan’s ongoing relations with their respective employees and with their respective business partners and joint venturers.
Forward-Looking Statements
Additional risks, uncertainties and other factors affecting forward looking statements include, but are not limited to, the following: •Alcoa is, and the combined company will be, subject to cyclical fluctuations in London Metal Exchange primary aluminum prices, economic and business conditions generally, and aluminum end-use markets; •Alcoa’s operations consume, and the combined company’s operations will consume, substantial amounts of energy, and profitability may decline if energy costs rise or if energy supplies are interrupted; •The profitability of Alcoa and/or the combined company could be adversely affected by increases in the cost of raw materials; •Union disputes and other employee relations issues could adversely affect Alcoa’s and/or the combined company’s financial results; •Alcoa and/or the combined company may not be able to successfully implement its growth strategy; •Alcoa’s operations are, and the combined company’s operations will be, exposed to business and operational risks, changes in conditions and events beyond its control in the countries in which it operates; •Alcoa is, and the combined company will be, exposed to fluctuations in foreign currency exchange rates and interest rates, as well as inflation and other economic factors in the countries in which it operates; •Alcoa faces, and the combined company will face, significant price competition from other aluminum producers and end-use markets for Alcoa products that are highly competitive; •Alcoa and/or the combined company could be adversely affected by changes in the business or financial condition of a significant customer or customers; •Alcoa and/or the combined company may not be able to successfully implement its productivity and cost-reduction initiatives; •Alcoa and/or the combined company may not be able to successfully develop and implement new technology initiatives; •Alcoa is, and the combined company will be, subject to a broad range of environmental laws and regulations in the jurisdictions in which it operates and may be exposed to substantial costs and liabilities associated with such laws; •Alcoa’s smelting operations are expected to be affected by various regulations concerning greenhouse gas emissions; •Alcoa and the combined company may be exposed to significant legal proceedings, investigations or changes in law; and •Unexpected events may increase Alcoa’s and/or the combined company’s cost of doing business or disrupt Alcoa’s and/or the combined company’s operations.
See also the risk factors disclosed in Alcoa’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006. Readers are cautioned not to put undue reliance on forward-looking statements. Alcoa disclaims any intent or obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law.
Where to Find Additional Information
In connection with the offer by Alcoa to purchase all of the issued and outstanding common shares of Alcan (the “Offer”), Alcoa has filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 (the “Registration Statement”), which contains a prospectus relating to the Offer (the “Prospectus”), and a tender offer statement on Schedule TO (the “Schedule TO”). This communication is not a substitute for the Prospectus, the Registration Statement and the Schedule TO. ALCAN SHAREHOLDERS AND OTHER INTERESTED PARTIES ARE URGED TO READ THESE DOCUMENTS, ALL OTHER APPLICABLE DOCUMENTS AND ANY AMENDMENTS OR
SUPPLEMENTS TO ANY SUCH DOCUMENTS WHEN THEY BECOME AVAILABLE, BECAUSE EACH CONTAINS OR WILL CONTAIN IMPORTANT INFORMATION ABOUT ALCOA, ALCAN AND THE OFFER. Materials filed with SEC are available electronically without charge at the SEC’s website, www.sec.gov. Materials filed with the Canadian securities regulatory authorities (“CSRA”) are available electronically without charge at www.sedar.com. Materials filed with the SEC or the CSRA may also be obtained without charge at Alcoa’s website, www.alcoa.com, or by directing a request to Alcoa’s investor relations department at (212) 836-2674. In addition, Alcan shareholders may obtain free copies of such materials filed with the SEC or the CSRA by directing a written or oral request to the Information Agent for the Offer, MacKenzie Partners, Inc., toll-free at (800) 322-2885 (English) or (888) 405-1217 (French). While the Offer is being made to all holders of Alcan Common Shares, this communication does not constitute an offer or a solicitation in any jurisdiction in which such offer or solicitation is unlawful. The Offer is not being made in, nor will deposits be accepted in, any jurisdiction in which the making or acceptance thereof would not be in compliance with the laws of such jurisdiction. However, Alcoa may, in its sole discretion, take such action as they may deem necessary to extend the Offer in any such jurisdiction.
Appendix
The Proposed Transaction
Offer
US$58.60 per share in cash and 0.4108 of a share of Alcoa common stock (1)
Total value of US$73.25 per share (2)
80% cash / 20% stock y
Premium
32% premium to Alcan’s 30-day average trading price(3)
20% premium to Alcan’s closing price on May 4th 2007(3)
Key Conditions
66-2/3% of Alcan shares tendered
Customary government and regulatory approvals
Financing
Fully committed bridge loan facility
Committed to maintain investment grade status
Listings
Additional listing planned for the Toronto Stock Exchange
Timing
We are in contact with the regulatory authorities
Targeting completion by year end 2007
| (1) |
|
Alcoa will deliver C$ at closing at then current exchange rates to shareholders electing to receive C$. |
| (2) |
|
Based on Alcoa share price of $35.66 as of May 4th 2007 |
| (3) |
|
Based on NYSE closing prices |
$1 Billion of Defined & Achievable Synergies
$1 billion annual pre-tax synergies
Includes overhead, manufacturing process optimization and procurement
Phased in over 3 years
One-time implementation costs approximately $1 billion
Overhead 40%
Manufacturing 40%
Procurement 20%
Type
Manufacturing Process Optimization
Overhead Productivity
Procurement
Total Synergies
Value ($mm)
$400 $400 $200 $1,000
Comments
Supply chain / logistics efficiencies
Manufacturing overhead optimization
Cross-Deployment of best practices
Eliminate redundant overhead costs
Complementary technology
Direct materials
Indirect materials
Leverage expertise from both companies to create more efficient combined company