By Eleanor Wason
LONDON (Reuters) - Buyout firms are circling takeover target Alcan Inc. AL.TO AL.N, signaling private equity interest in metals and mining, an area they previously shunned because of cyclicality and commodity price volatility.
"Just in London I can think of four or five (private equity firms) who have a clear interest in the (steel) sector," Laurent Charbonnier, UBS's European head of steel, paper and packaging, told the Reuters Global Mining and Steel Summit in London.
The consolidating industry offers relatively low debt and cheap stock market valuations, but also poses the kind of political and operational risks private equity typically avoids.
Canada's Alcan has rejected U.S. rival Alcoa's (AA.N: Quote, Profile, Research, Stock Buzz) $28.4 billion offer and is talking to third parties, fuelling talk of a counter-bid.
Alcoa Chief Financial Officer Charles McClane told the Reuters summit financial sponsors were interested in downstream assets, or processed products, that could be spun off for anti-trust reasons in the event of a takeover.
Opinions are split, though, on how far upstream private equity might go and how big an acquisition it could stomach.
"Private equity would be interested in the downstream assets of North American players," United Company RUSAL's strategy and corporate development director Artem Volynets told the summit.
"They have stable cash flows that you can leverage ... Upstream assets are a different story. It's not their natural playground because of the volatilities of the cycle." Continued...
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