Shares in Elkem, the Norwegian metal group, rose 8.4 per cent yesterday after management and its largest shareholder rebuffed a NKr155 per share offer by Alcoa valuing Elkem at NKr7.6bn (Dollars 850m).
Alcoa, the world's largest aluminium producer, said it planned to make an offer within the next four weeks worth NKr4.6bn for the 60 per cent of Elkem it does not already own. The price represented no premium above Tuesday's closing price in Oslo and therefore was not a very good offer, said Finn Jebsen, Elkem chairman.
He is also chief executive of Norway's Orkla, the second-largest shareholder in Elkem with 32 per cent.
"The value most analysts have attached to the share is NKr200," Mr Jebsen said.
News of the rejection sent the shares up NKr13 to NKr168 on hopes that Alcoa might sweeten the offer. However, Alcoa said it believed Elkem's business offered a solid value at NKr155 per share.
Alcoa has long been expected to make a full offer for Elkem. The US aluminium group has gradually built up its stake to 39 per cent - to the frustration of Elkem's management - before it bought more shares this week.
The additional share acquisition brought Alcoa to the 40 per cent threshold level that in Norway triggers a mandatory offer for the rest of the shares. Analysts believe Alcoa may not receive many acceptances for its offer at the current price, but that it may be part of its tactical move to mop up shares in the market after the offer period expires, perhaps even at a lower price.
Alcoa downplayed the idea that it was a half-hearted offer, saying that it followed Norwegian rules to the letter. "The law is very mechanistic in terms of what we have to do," it said.
Moreover, Alcoa suggested that after the tender offer expires in about four weeks, it would be free to put together offers to increase its stake to 50 per cent or more. "We like this company," a spokesman said.
Elkem is the world's largest producer of silicon metal, used in the electronics and aluminium processing industries.
It also produces ferrosilicon for the steel and iron foundry industry, aluminium, carbon products, chrome and energy. Last year the company, with 4,000 employees, reported NKr9.7bn in sales.
Svein Sundsbo, an Elkem senior vice-president, warned that if the offer was accepted by shareholders, European competition authorities might force Alcoa to sell Elkem's 36 per cent stake in Sapa, a Swedish aluminium company, or parts of Alcoa's aluminium business. Elkem's board will present to shareholders its official recommendation on the offer a week before it expires.