Alcoa/Rio Tinto Rumor Gets New Life

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Dow component Alcoa, the largest U.S. aluminum producer, is once again rumored to be a takeover target for Rio Tinto, the world's third-largest mining company. This rumor has been in the press several times in the past, but no deal has ever come to fruition and analysts and investors doubt this time will be any different.

Still, shares of Pennsylvania-based Alcoa (AA) jumped almost 3% today on nearly triple the average daily volume. More than 360,000 calls to buy the stock changed hands, eight times the four-week average and the fourth-largest call volume on U.S. exchanges, according to data compiled by Bloomberg.

Some analysts said rumors that Rio Tinto (RIO) would offer $25.50 a share for Alcoa, an almost 50% premium to where the shares closed on Tuesday, are unsubstantiated. Analysts also said the deal, if it came to pass, would face significant antitrust scrutiny in the U.S.

Rio acquired Canada's $38.1 billion in 2007 soon before the start of the global financial crisis in a deal that saddled Rio's balance sheet with almost $40 billion in debt. That acquisition has left Rio investors wary of another major deal and most seem to prefer the company's plan to make smaller acquisitions.

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