Chapter 385: You're a White Knight
On the other side of the ocean in Canada, the media broke a sensational story.
Alcoa submitted an official acquisition offer to Alcan's board of directors, proposing to purchase 100% of Alcan's shares for a total price of $26.8 billion USD.
The number—$26.8 billion—appeared huge at first glance.
However, when calculated per share, the offer came to roughly $68 per share, which was surprisingly low.
Over the past few months, due to speculation about potential takeovers, Alcan's stock price had steadily risen, recently trading between $71 and $73 per share.
Alcoa's offer was significantly below the current market price, causing outrage among Alcan's shareholders.
"Alcoa isn't just robbing us—they're openly insulting Alcan shareholders!" shouted Mr. Wiggins, Chairman of the Ontario Teachers' Pension Plan, during an interview with the Financial Post.
As Alcan's largest shareholder, holding nearly 10% of its stock, the Teachers' Pension Plan had a significant voice amid the escalating takeover battle.
Facing the microphone, Wiggins sharply condemned Alcoa's actions: "Alcan's value isn't merely reflected in the stock price. In my view, even Alcan's current share price of $71 is severely undervalued. Alcan's true value should easily exceed $100 per share!"
Reporter Irwin interjected, "However, Alcan's current stock price of $71 is already at a historical peak. Before the takeover rumors surfaced, Alcan shares had never surpassed $60. The market consensus is that the potential takeover is what's driving the current price upward."
Wiggins strongly disagreed. "Alcan's stock has been consistently undervalued. You must understand, Alcan controls several aluminum rolling plants in Korea, owns the largest aluminum alloy manufacturing facilities in Europe—particularly critical for the aerospace industry—and dominates the North American aluminum packaging market. Furthermore, with a deepening partnership with Li Tang, China's most successful mining entrepreneur, our business in China will become increasingly important."
"Indeed, an investment company from Hong Kong controlled by Li Tang has been steadily acquiring Alcan shares in various global markets," Irwin noted.
Irwin had been closely following this development but was puzzled by Li Tang's motives, as it seemed inconsistent with his usual investment strategies. Seizing the opportunity, Irwin asked, "Speaking of Li Tang, Mr. Wiggins, do you know Li Tang's real intention behind investing in Alcan? Is it possible he's preparing a full takeover bid?"
Wiggins had memorized his answers for the prepared questions, but this unexpected one briefly caught him off guard. However, he calmly responded, "I have met Li Tang personally. He's an exceptional businessman, remarkably successful in mineral exploration and mining development. His vision and investment acumen are unmatched. His investment in Alcan clearly indicates his optimism about Alcan's future prospects."
"Indeed, Li Tang's investment is proving extremely shrewd," Irwin continued. "He invested over $2 billion USD within just a few months, specifically targeting Alcan. This investment has already yielded at least $400 million USD in profits."
During recent months, Irwin had closely tracked Alcan's stock performance and Li Tang's growing investment gains, finding himself repeatedly amazed by this young Chinese entrepreneur. He desperately wanted to write an article analyzing Li Tang's investment philosophy regarding Alcan. Today was a perfect opportunity.
He continued probing, "Do you think Li Tang is focused on Alcan's short-term gains or its long-term growth potential?"
Wiggins paused briefly before confidently replying, "As you mentioned, Li Tang's investment has already generated over $400 million USD—a significant profit. Yet, according to our knowledge, Li Tang's investment company has not started liquidating their holdings. Instead, they've continued to buy Alcan shares on the secondary market. This behavior clearly indicates Li Tang's long-term confidence in Alcan."
"If he continues increasing his holdings, he could soon become Alcan's largest shareholder."
"This would be great news for Alcan," Wiggins said enthusiastically, warming to the subject. "China undoubtedly represents Alcan's most promising growth market. Everyone knows Li Tang's influence and authority in China. If he becomes Alcan's largest shareholder, Alcan will achieve unparalleled success there."
Previously, Alcan's management openly admitted that their entry into China was delayed by over two decades, vastly underestimating China's rapid economic growth. Consequently, they were far behind their competitors, making it difficult to secure significant market share.
Now, however, analysts generally agreed that Li Tang's involvement presented a huge opportunity for Alcan. Alcan's board openly praised CEO Richard and his management team for attracting Li Tang as an investor.
"If Li Tang genuinely helps Alcan expand significantly in China, Alcan's growth in the next decade will accelerate dramatically, potentially reversing its current financial struggles," Irwin observed positively, before circling back: "But you haven't answered my original question: Could Li Tang attempt a full acquisition of Alcan?"
"No," Wiggins shook his head confidently.
"Why not?"
"He doesn't possess the resources. Moreover, I recently met Li Tang, and he's expanding his global investments extensively. Alcan is just one of many targets."
"So, he has other investments in mind. Can you reveal what those might be?"
"No." Wiggins certainly knew about Li Tang's planned investment in Batista's GX Oil company, a highly promising project in which even the Teachers' Pension Plan had decided to invest. Still, facing Irwin's eager gaze, he simply added cryptically, "It's a very promising project that will soon cause a global sensation. Stay tuned!"
Hearing this, Irwin became even more anxious, frustrated by incomplete answers. However, realizing he couldn't pry more from Wiggins, he turned his attention to his next key interviewee, Alcan CEO Richard.
"We've unanimously rejected Alcoa's offer," Richard announced without hesitation. "The board will never approve such an insulting bid."
Irwin enjoyed Richard's straightforwardness. Taking advantage of this rare chance, he quickly asked, "Do you believe Alcoa's current offer is reasonable?"
"Absolutely not!" Richard openly treated Alcoa like an enemy. "For two years, Alain has tried to purchase Alcan at a bargain price. They mistakenly believed we faced severe financial problems. They underestimated our future potential. This $26.8 billion offer, composed partly of cash and partly of equity swaps, is too low—an act of desperation and anger, as Wiggins stated. This is a direct insult to Alcan!"
"Will Alcoa abandon their takeover attempts?"
"If they have any sense, they'll immediately drop these unrealistic ambitions."
"Could they increase their offer?"
"Perhaps, but their attempt will ultimately fail."
"They've been purchasing more Alcan shares on the open market, aiming to bypass the board and directly control the shareholders. How will you respond?"
"Their progress is slow," Richard chuckled confidently, seemingly unconcerned. "Several major mining companies—not just Alcoa, but also Rio Tinto, Vale, and Xstrata—have been buying our shares. Also noteworthy is Li Tang, the Chinese investor who began acquiring our shares months ago and now holds approximately 11%. There's limited stock remaining in circulation."
At the mention of Li Tang, Irwin immediately perked up again. "Given Alcan's dispersed shareholding, aren't you worried these mining giants might achieve control through open-market purchases?"
"Not at all," Richard shook his head confidently. "Our shareholders have faith in Alcan's prospects, so few are selling. This effectively blocks any hostile takeover attempt. Especially Alcoa—previously they repeatedly insisted our share price exceeded our actual value, always proposing prices lower than market. Yet, during this period, our share price steadily rose, proving market confidence in us."
Richard's logic seemed reasonable until the final point, which Irwin found dubious. Alcan's rising stock price had little to do with company performance. Rather, it was purely driven by the market's expectation of a significantly higher acquisition price from major global mining companies. Investors were simply betting on someone making a generous offer.
"You remain certain Alcan won't be acquired?"
"We've prepared comprehensive defensive strategies against any hostile takeover."
"Are you concerned another mining giant might suddenly initiate a surprise takeover?"
"A surprise takeover?" Richard shook his head again. "Apart from Alcoa, no other company has explicitly declared interest in acquiring Alcan."
"Spokespersons from Rio Tinto, Vale, and Xstrata have expressed keen interest in your current conflict with Alcoa."
"Everyone in finance and mining is closely watching us, aren't they?"
"What about Li Tang?" Irwin asked. "The Chinese consortium led by Li Tang, along with Chinese state-owned giants like Chalco and CITIC Pacific, is formidable."
Richard hesitated momentarily at this question. Alcan was increasingly cooperating with Chinese companies like Chalco to strengthen its market presence in China.
Yet the idea of Li Tang's consortium acquiring Alcan seemed impossible—like a snake attempting to swallow an elephant. There was simply no room for such an operation.
Still, Richard felt deeply puzzled, unable to fully comprehend Li Tang's strategy. Why was Li Tang pouring enormous funds into Alcan's stocks amidst market turbulence and uncertainty?
What exactly was Li Tang planning?
In New York, not far south from Toronto, Alain, CEO of Alcoa, firmly expressed his stance during an interview with the New York Daily: "Acquiring Alcan has been our unwavering strategy for the past two years! This merger will benefit both sides, undoubtedly creating greater value for shareholders! Regardless of the obstacles, our goal remains firm!"
A reporter from the New York Daily quickly asked a follow-up question: "Your initial official bid of $26.8 billion USD was swiftly and firmly rejected by Alcan. Do you plan to increase your bid?"
"All I can say is we'll do everything necessary to achieve our goal! We won't compromise on this matter, no matter the method!" Alain declared with determination.
"Do you have sufficient financial reserves?" the reporter continued.
"It's hard to predict how things will unfold, but stay tuned—we definitely won't disappoint Alcoa's shareholders!" Alain's words emphasized their commitment to the takeover, but he provided few substantial details.
The New York Daily reporter had no choice but to leave disappointed.
Yet, the very next day, the New York Daily broke major news from another source:
Alcoa had secured financing from a Wall Street investment banking giant totaling a staggering $30 billion USD!
With this massive sum, Alcoa became significantly stronger, greatly increasing its chances of successfully acquiring Alcan.
Instantly, the entire financial and mining sectors erupted with surprise!
Economic analysts and commentators overwhelmingly predicted Alcoa would successfully complete its acquisition of Alcan. Some even declared excitedly that the largest merger in mining history was imminent!
Meanwhile, in stock exchanges across New York, Toronto, and London, Alcan's shares became highly sought after, nearly impossible to obtain, with prices soaring toward $80 USD per share!
Li Feiqun and Alice hesitated upon seeing Alcan's surging stock price. Even though they had the means to buy, the $80 per-share price was daunting, and actual transaction prices often required paying significant premiums above market price, further increasing their risks and costs.
Unable to confidently make such a significant investment decision, they decided to fly to Yanjing to seek Li Tang's advice personally. With a decision this critical, only Li Tang could bear the responsibility and pressure.
Li Tang had been taking it relatively easy these past few days, partially making up for missing Chinese New Year by spending extra time with his family. He had just escorted his parents back to Qianzhou province, as they had to resume work. These past days, together with Li Xinqi, they had enjoyed harmonious and relaxing moments.
When he arrived at the Summit Tower's small meeting room and saw Li Feiqun and Alice waiting, he asked curiously, "Why are you both here? Did you complete the task?"
"Recently, we did everything possible and managed to acquire more Alcan shares. Currently, our holdings have nearly reached 12%. From about 9% to 12%, this increase of less than 3% cost us $850 million USD! The average purchase price for these shares was around $75 USD. We currently have approximately $150 million USD remaining, but Alcan's share price has already risen to around $80 USD!" Li Feiqun reported.
Despite carefully following Li Tang's directives and closely cooperating with Alice's instructions, Li Feiqun had felt immense pressure, afraid of making mistakes that could cause heavy losses.
"That's good enough," Li Tang nodded thoughtfully. "Our holdings are about 12%. With our convertible bonds included, after conversion, we'd own about 12.5%, correct?"
"Yes," Li Feiqun replied. "It's extremely challenging to continue buying Alcan shares on the open market now. Whenever shares appear, they're quickly snapped up at significant premiums—prices of $85 or even $90 USD per share have become quite common!"
She exhaled heavily, visibly relieved after sharing these difficulties openly with Li Tang. "Buying more shares at transaction prices of $85 or $90 USD carries enormous risk. Our analysts at Jiangda Securities unanimously agree the stock price is now dangerously high and could fall sharply at any moment! They strongly recommend we sell now, capturing profits before it's too late!"
Rational investment masters never try to sell precisely at market peaks. Instead, they exit decisively after reaching their targeted profits, ignoring subsequent surges or collapses.
But Li Tang wasn't a typical investor.
His original goal was indeed quick profit, but now his objective had shifted significantly.
He intended to use his holdings in Alcan to deliver a severe blow to Rio Tinto.
Thus, the investment couldn't stop yet.
He needed his holdings—shares plus convertible bonds—to reach 14% of Alcan's equity.
This 14% threshold carried special significance:
Since Alcan spun off from Alcoa back in 1908, it had operated independently for nearly a century. With dispersed ownership, such legacy corporations typically have rules specifying that any shareholder owning at least 14% has veto rights on major corporate actions.
Alcan, Rio Tinto, BHP Billiton, Xstrata—all these globally dispersed-ownership firms had similar provisions.
Li Tang's legal team had specifically confirmed that Alcan indeed had such a provision.
Hence his current strategy:
Secure at least 14% of Alcan's shares!
Although they currently owned about 12.5%, achieving the crucial 14% was an arduous and expensive endeavor.
As Li Feiqun pointed out, there were fewer and fewer Alcan shares available, and actual transaction prices often greatly exceeded market prices, increasing both difficulty and risk.
"Our current profits are already substantial," Alice interjected, sensing Li Tang's hesitation and providing an alternate viewpoint to consider. "If we sold now, we'd easily find buyers at around $80 USD per share, securing excellent returns."
"Yes," Li Feiqun agreed enthusiastically. "Our initial $2.05 billion USD investment bought approximately 9.5% of Alcan at an average cost of $57 per share. If we sold at $80 USD, our profit would be about $830 million USD, an incredible 80% return!"
"This kind of return is astonishing," she continued. "In my years at Jiangda Securities, it's rare to witness such high profits achieved in such a short time frame."
"The second investment, totaling $850 million USD, acquired about 3% of Alcan at $75 per share. With recent share price gains, we've earned approximately $67 million USD in less than two weeks," Alice explained earnestly. "We've already profited immensely. We must trust Ms. Li's analysis and not chase the last penny. When the mountain collapses, nobody still climbing it will escape unharmed."
Li Tang, however, was not contemplating selling their shares. He was instead considering how to achieve the remaining 1.5% needed to reach the critical 14% threshold.
He realized the tremendous pressure that further buying at current prices placed on Li Feiqun and Alice. He was a considerate boss, unwilling to force others into excessively challenging tasks.
However, despite these high costs and risks, Li Tang resolved firmly: They had to continue buying.
"Alcoa has contacted Jiangda Securities directly, expressing willingness to purchase some or all of our Alcan shares and convertible bonds at a suitable price," Li Feiqun announced, considering it fantastic news if they wished to quickly cash out.
Only industry giants like Alcoa could offer nearly $4 billion USD to buy their entire stake.
"Alcoa underestimated Alcan's resolve initially," Li Feiqun laughed, addressing Alice. "Now, seeing Alcan's share price skyrocketing, Alcoa's takeover has become incredibly expensive—costing nearly double their initial estimates!"
"They brought it upon themselves," Alice replied with a smirk.
Li Tang finally lifted his head, having made his decision. "Our remaining $150 million USD isn't sufficient. To reach 14%, we must purchase an additional 1.5% stake in Alcan."
"14%?" Li Feiqun repeated, stunned. She suddenly understood Li Tang's strategic intentions clearly.
"You're Alcan's White Knight!" she exclaimed in surprise.
"What White Knight?" Li Tang asked, smiling calmly.
"You have a secret agreement with Richard! You're helping Alcan defeat Alcoa's takeover!" Li Feiqun felt she'd uncovered an enormous secret.
By holding 14%, Li Tang could indeed block Alcoa's takeover attempts outright.
Li Tang shook his head. "I'm neither a White Knight nor a Black Knight. My goal is simple: to keep investing and earning substantial profits."
"You intend to continue buying more Alcan shares?" Li Feiqun asked, confirming her understanding of Li Tang's aggressive investment philosophy.
"Yes," Li Tang affirmed.
"To buy 1.5% at roughly $85 per share, we'll need an additional $350 million USD," Li Feiqun quickly calculated. "Our remaining funds aren't enough."
"That's precisely why I rely on you, Director Li," Li Tang smiled.
"You want to leverage further?" Li Feiqun confirmed.
"Yes, we'll require more funds—another $350 million at minimum," Li Tang replied firmly.
"No problem," Li Feiqun answered immediately. Given their considerable holdings and profits, Jiangda Securities would eagerly accommodate his request, confident in his robust repayment capacity.
"Then let's proceed," Li Tang said decisively, before turning to Alice. "As for Chalco and CITIC Pacific, I'll personally explain our strategy."
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