Privatisation of aluminium plants Alro and Alprom will be one of the toughest takeover battles ever seen on the Romanian market, as it involves a great deal of political and economic interests and given that the largest producers in the domain and the most influent trade companies have already announced their participation in the tender.
The stake of the battle for the two companies is not only their export market and their potential of growth, in case of substantial investments, but also the domestic market, where aluminium consumption per capita is almost three times lower than in the West.
French group Pechiney, the main European aluminium producer and the fourth-largest worldwide has already announced that it would take part in the tender. "We want to buy Alro and Alprom," Pechiney aluminium sector prime vive-president Philippe Varin told Ziarul Financiar.
Alcoa, the main producer worldwide, also considers attending the bid, market sources say. At the same time, another American group might participate in the tender, beside a Greek financial group.
Trade company Balli wants to buy the two companies and create a single integrated holding, given that it has operated investments in Tulcea-based BBAG Alum, an alumina producer of which aluminium is derived.
The above-quoted sources say that trade company Glencore is chiefly interested in Alprom. Two Greek groups have also entered the game. A number of 18 investors have displayed interest in these companies.
A financial market analyst estimates that at least four competitors have serious intentions as they may submit bids. These four investors are grouped in four consortia comprising either one producer and a financial group, or a trader and a financial group.
Each of these companies relies on financial force and important connections. "This will certainly turn into a tremendous battle. We might see a fight between strategic and financial investors. The performance will last for several acts," Creditanstalt Investment Bank Romania chairman Florin Pogonaru said.
Alro accounts for 1% of the world's aluminium output and is one of the most important companies in Central and Eastern Europe. Its financial results are outstanding, profit estimated for this year amounting to more than 65 million dollars, against 316 million-dollar turnover. Alro is working at full capacity and its output is increasing. Alprom has a weaker financial situation, working at only 37% of capacity.
Pechiney officials state that, in time, benefiting from important orders and large investments, Alprom may reach a 400% increase in output. The French company states that it will bring orders for Alprom, as it is the main provider of aluminium products for Renault and Peugeot. At present, the car-making industry incorporates a greater amount of aluminium products and the tendency is of further growth.
Pechiney officials say that their strategy includes the integration of Alro and Alprom into the company's European and global network, as well as significant upgrading investments in the two companies. "We are here to stay. We are interested in a long-term commitment," Philippe Varin from Pechiney said. In order to take part in the bid, the French company formed a consortium together with investment fund AIG - Emerging Europe Infrastructure Fund, which holds a stake of 30%.
According to analysts, the assessment for Alro begins by an analogy with the value of a plant with similar capacity of production, based in a Western country. The necessary investments are also assessed, then the country risk and social problems are subtracted from the value. According to this method, Alro is assessed at 250-300 million dollars.
Alro is the best company on Bucharest Stock Exchange, with a market value of 116 million dollars. Analysts recommend a Buy position for Alro shares, but are warning that privatisation with a strategic investor may negatively influence the shares' evolution on the stock exchange.
"Alro is the last blue-chip on the Stock Exchange which may lose it, considering the current circumstances concerning protection of minority shareholders," says Cristian Andrei Siminel, representative of the most powerful investment fund on the Romanian market, Broadhurst.
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