In 1994, I concluded 22 years of public service and a stint as head of an industry association and joined Alcan Inc. in Montreal as the newest member of its executive committee, with a mandate to restructure its cor- porate affairs function. I’d worked in the Privy Council Office as head of communications, and previously as princi- pal secretary to Premier David Peterson of Ontario. I thought I knew about managing issues, and stress, at the centre. But nothing prepared me for the next decade and more of being part of a senior management team re-engi- neering and repositioning Alcan as one of Canada’s pre-emi- nent global corporations, operating in 28 languages at more than 400 plants and offices, in more than 60 countries, on five continents, around the world.
We didn’t need to hear the talk about globalization. We lived the walk. Everyone knows the environmental mantra ”” think globally, act locally. That was, essentially, our busi- ness culture. We didn’t just have customers, we had com- munities, all over the world. We didn’t just deal with local and national governments, we dealt with regional and glob- al institutions, such as the European Union on mergers and acquisitions, and the United Nations on climate change and emissions reductions. We weren’t in business to create just shareholder value, but an enhanced culture of value for all our stakeholders, including employees and suppliers. We were also intensely focused on the profit motive, without which all other motives would have been moot.
We were operating in a global business segment ”” aluminum ”” that was living through a revolutionary period in the 1990s. The fall of the Berlin Wall in 1989 and the col- lapse of the Soviet Union in 1991 also knocked down the walls and artificial trade barriers between Russia and the West in world aluminum markets. In the beginning, the Russians simply dumped aluminum onto Western markets, to obtain much-needed cash from a commodity sold world- wide in US dollars at prices established by the London mar- ket. That’s a world away from Alcan’s smelter operations in the Saguenay region of Quebec, but every market fluctua- tion impacted on our business. In a way, we had to think locally to act globally.
Through it all, travelling the world with global respon- sibilities in public affairs and the environment, I never had a sense of anything other than representing a Canadian cor- poration that belonged, like our country itself, on the world stage. Alcan was known, and known to the world, as a Canadian standard-bearer. We weren’t better than the Americans, just products of a different business culture ”” pluralistic, multicultural and always seeking a consensus.
Now, after more than a century, Canada’s largest global manufacturing corporation, with sales of US$24 billion in 2006, is certainly hunted, and possibly a hunter, in the great game of mergers and acquisitions. Founded by Alcoa in 1902, Alcan has rejected a US$28-billion hostile takeover bid by its one-time parent, and might have acquisitive ambitions of its own. It has already done very well, surviving and thriving, in this very competitive game.
But I am getting ahead of the story.
In 1994, Alcan was already a Canadian and Quebec icon, thanks to former CEO David Culver, whose Maison Alcan project was an article of faith in Montreal and Quebec’s future on the heels of the first referendum on Quebec sovereignty. This award-win- ning architectural landmark reflected Alcan’s international footprint, its cul- tural diversity and its Quebec and Canadian reality. More than this, it was a commitment to the future of investments and business and a boost for the morale of Montreal and Quebec in a difficult time.
The occupants of the Maison have changed over the years but I do remember feeling as if I had just stepped into a United Nations setting, with Jamaican, Chinese, Japanese and Indian colleagues, as well as Americans and Canadians. You could hear in Maison several versions of English from around the world ”” including American and Canadian English, eh? And you could feel both the singular Quebec character of its primary metal group and the Brazilian, Australian and Jamaican nature of its bauxite and alumina group while admiring the global reach of its varied rolling operations. The diversity and international mindset were part of Alcan’s history from its inception in 1902.
In the late 1980s after record- breaking years of returns, Alcan found itself losing several hundreds of millions and many wondered how the company was going to survive. This is where Jacques Bougie, in lead- ing a strategic review, helped return Alcan to its core strengths and focused the organization on core and profitable businesses. The plan approved by the board was to be Alcan’s operational plan ”” one which saw the divestment of many individual and diversified businesses that were not core to the new organ- ization or where it was felt that new owners would be better able to ensure financial health and growth.
This multi-year restructuring was anything but easy: the company was not only diverse and international, its people were proud of the national or regional units for which they worked. The values of Alcan, embodied in one of the first written codes of conduct, distinguished the company and reflect- ed the ethics of its founders. The divest- ments touched many regions as Alcan slimmed its UK operations, rationalized its many North American rolling units, sold its equity position in Nippon Light Metal and divested INDAL, its Indian aluminum operations. The goal was to restore the company to financial viability, to deliver shareholder value and to build a platform for growth. There were also some acquisitions during this peri- od but nothing of the scale of Alcoa’s moves under Paul O’Neill’s 20/20 ”” $US20 billion by 2000. (O’Neill later became the first treasury secretary in the administration of the second George Bush.) This not only ignited Alcoa but it increased significantly the gap between it and Alcan and accelerated the indus- try’s restructuring, which continues to this day.
Alcan’s response was not long in coming, as the competitive pressure continued to mount and the period of divestment came to a natural end. With continuing industry rationalization as a backdrop, and the rapid growth of the Russian and Chinese aluminum indus- tries, the next move for Alcan was not so much a defensive move as a strategic require- ment. In August 1999, three CEOs, Jacques Bougie of Alcan, J.P. Rodier of Pechiney and Sergio Marchionne of Algroup, announced an unprecedent- ed three-way merger valued at US$9.5 billion, which, once approved, would have created the largest aluminum and packaging company in the world. We were all excited at the launch of this announcement; so was Alcoa. Twenty-four hours later and they moved on the acquisition of Reynolds, thereby retaining its claim to being the biggest player in the aluminum industry.
APA (Alcan-Pechiney-Algroup) was an awesome experience in trying to merge three national aluminum com- panies, each with international reach, each with a proud over-100-year histo- ry and at least two (Alcan and Pechiney) positioning to retain control while recognizing the imperative of this very logical business initiative in a fast- moving and evolving global industry. Many committees were established to look at functions and business opera- tions ”” the merger of equals drew in hundreds of executives in examining everything from cultural fit to selection of the future structure and senior levels of management. Issues of share of man- agement position, asset retention and future board and CEO succession were palpable. The pride factor on what the new company would be named was symptomatic of the stresses: Alcan was the best recognized, Pechiney was the leader on technology while Algroup was content to close the deal.
In the final analysis we were spared from what would have been a complex integration process, and a succession struggle, by the European Commission’s Competition Bureau. Its draft report demanded the divest- ment of either Pechiney’s Neuf Brisac Rolling Mill in Alsace or Alcan’s 50 percent share in AluNorf in Germany. The latter was a mill which contained technology and had received considerable invest- ments from Alcan. Bottom line: Alcan’s divestment under these circumstances would destroy too much value. The directors agreed and the big deal with Pechiney was called off, leaving a smaller deal with Algroup.
This Swiss aluminum and packag- ing company had been ”œfor sale” for some time and it was a foregone con- clusion that either Alcan or Pechiney would acquire it. In June 2000, Alcan successfully completed a US$4.7-bil- lion takeover and soon, under Dick Evans’s leadership in Zurich, the process of integrating the two busi- nesses began in earnest. This Canadian-Swiss experience proved instrumental in allowing Alcan to gain practical experience in how to merge two business cultures. These lessons and techniques were later applied in the much larger Alcan acquisition of Pechiney.
But an unexpected succession crisis lay just around the corner. Over the holidays in January 2001, Bougie, just 53, suddenly walked away from the business. His decision to leave the next five years of intensive effort to a successor caught all of us by surprise. It was one of those moments in life when the depth and strength of both management and the board saved the day. Alcan director Bill Blundell, a former CEO of GE Canada, became interim CEO while the human resources committee and board member Travis Engen, former CEO of ITT Industries, launched a search for what Alcan needed in terms of a CEO. In the end the board con- vinced Engen to recruit himself as Alcan’s CEO.
Engen prepared his team for what he knew would be a return to the logic that drove the APA combination. First item starting blocks: focus on the business priorities and strengthen Alcan’s finan- cial strength. It was not long before he was to raise the question with Pechiney’s J.P. Rodier of whether the two companies should re-examine a friendly merger. Pechiney was still frag- ile from the failure of the three-way merger ””it was also financially weak from these efforts.
July 2003 and the beginning of summer holidays in France turned out to be prophetic for both companies. Alcan executives and advisers spent time sequestered in Paris, careful not to announce our presence while preparing for a public offer for the French aluminum and industrial jewel.
The bid was a logical follow-up to the earlier APA and the natural conclu- sion of the industry’s best value-creating option; the press and Pechiney saw it as ”œnot unfriendly” and ”œhostile or unfriendly” respectively. Four members ”” Engen, Brian Sturgell, David McAusland and I ”” were the core nego- tiating team, supported by legal and financial advisers. Once we found offices to lease from one of our legal advisers, we had a Paris address, a boardroom, com- puters to crunch numbers and one fax machine supported by a coffee machine.
For the next several months, we worked virtually around the clock in our Paris war room, not only managing the financial and regulatory issues around a hostile takeover, but equally messaging strategic communications with the French and European media. One of my favourite moments occurred when Engen, a native New Yorker, explained to Le Monde that as a Canadian company, we shared French and European social values, unlike an American company we didn’t have to name.
We spent months in Paris, with- out seeing Paris. Travelling home on weekends ”” between Paris and Montreal ”” was one of the longest commutes on record. Armed with the lessons learned from APA, operating on information gathered over the time since the failed three-way deal and proactive both in communica- tions in France and in the markets, Alcan succeeded in completing the acquisition. In September 2003, Pechiney’s board recom- mended Alcan’s offer of US$4- billion, or about US$54 a share to its shareholders.
After two mergers and acqui- sitions, Alcan became the sec- ond-largest aluminum company in the world. In a brief five years, Alcan had doubled its size and revenue base twice: its geograph- ical footprint spread to all five continents. The employee base was approaching 70,000 people.
Canadian, American, French, Australian and Chinese are all still represented in and part of the Alcan story. When you walk the corridors of Maison Alcan, all those languages and accents are still heard. With world headquarters in Montreal, this Canadian icon has from its inception been a culturally diverse and international company. The company has generated eco- nomic wealth while helping meet the many needs of its communities. It has proven that a Canadian company can be world-competitive in the major leagues of international business. That’s some- thing worth carrying on to the next gen- eration of global business challenges.