Alumax Calls Kaiser Takeover Bid Inadequate

Alumax Inc., responding to Kaiser Aluminum Corp.’s unsolicited offer to buy the company for $2.2 billion to $2.5 billion in cash and stock, on Friday called the bid inadequate and said it is not seeking a sale.

Investors shrugged off Alumax’s response in the belief that the thriving Norcross, Ga.-based aluminum maker may consider a higher offer from Kaiser, an industry laggard and the smaller of the two companies, analysts said.

Alumax shares soared 17%, closing up $5.625 at $38.125, after the $40 to $45 a share offer was disclosed. Shares of Houston-based Kaiser, a publicly traded unit of Maxxam Inc., rose 6%, or 87.5 cents, to $15. Both trade on the New York Stock Exchange.

Alumax Chairman and Chief Executive Allen Born “is playing hardball,” said J. Clarence Morrison, a metals analyst at Prudential Securities Research, echoing other analysts who said Alumax might consider an offer of $50 a share, if Kaiser makes one.

Alumax said Friday that it received a letter from Kaiser Chairman and Chief Executive George Haymaker Jr. that asks the company’s board to reconsider the offer of $30 a share in cash, with the balance in Kaiser shares.

Although Alumax’s board will consider Kaiser’s offer at its next meeting in March, “we have not sought, and we are not seeking, a sale of the company,” Born said.

Born, whose company adopted a “poison pill” plan to deter a hostile takeover attempt, said “the price Kaiser is proposing would be inadequate in any case, and we’re particularly dubious about the equity portion of the proposal.”

In the wake of Kaiser’s surprising offer, Standard & Poor’s Corp. placed the debt ratings for Kaiser, Maxxam and Alumax under review for a possible downgrade, saying a financed acquisition would “increase Kaiser’s already heavy debt burden.” The debt of Kaiser and Maxxam is already junk status. Alumax carries a higher BBB rating.

Analysts say Alumax would gain little from a merger with Kaiser, which is steeped in debt.