Canadian company Alcan, the world's second-largest aluminum producer, has not given up hope of absorbing one of its European competitors, the French Pechiney. After Pechiney's management rejected the Canadians' offer worth $3.9 billion, Alcan proposed raising the deal price to $4.34 billion. But even this offer seems insufficiently generous to Pechiney's top managers.

In early July, Canadian metals group Alcan made a €3.4 billion ($3.9 billion) public offer to Pechiney shareholders to acquire a controlling stake in the French company. Alcan offered €123 ($139.5) plus three of its new shares for five Pechiney shares, valuing each Pechiney share at €41 (then about $46.5) apiece.

Now, after Alcan's own stock price has risen, the Canadian company's management believes the deal is worth about $49 per share, raising the value of the entire company to $4.34 billion, or about 9%.

However, on Sunday, Pechiney's board of directors decided that this price was also too low. The board declined to recommend that its shareholders accept the deal. Pechiney management said that while the new offer was more favorable than the previous one, the price did not reflect the company's real value "in light of the positive market trends regarding the euro-dollar exchange rate and aluminum prices."

In addition to the dollar strengthening against the euro and rising aluminum prices, Pechiney executives say the company's value should increase thanks to the introduction of new aluminum smelting technologies.

In a statement, Pechiney said "there are benefits to consolidation," although the company would only remain "fully viable" as an independent company. The statement also said Alcan's offer to Pechiney shareholders still needs to be approved by European Union antitrust authorities.

Having failed to make headway with its new proposals, the Canadian company has returned to the terms of its previous offer. On Monday, Alcan ended negotiations with the French company and left its original offer in place. Representatives of Alcan, the world's second-largest aluminum company (it accounts for 18% of global aluminum production), are confident that Pechiney shareholders will agree to sell even on the less favorable terms proposed two months ago.

The market reacted very positively to Pechiney's decision.

After Pechiney announced that it would not accept Alcan's offer, trading in the French company's shares on the Paris Stock Exchange was temporarily halted on Monday morning. After they reopened, Pechiney shares rose to about $51.4 by evening, up 1.8% from Friday's closing price. (Materials from WSJ, FT, 1. 09. 2003 were used.)

Pechiney does not give up on Alcan