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August 11, 1999

Alcoa Offers to Acquire Reynolds Metals Company in a Cash and Stock Transaction Valued at $5.6 Billion

Pittsburgh, PA--August 11, 1999-- Alcoa Inc. (NYSE: AA) announced today that it delivered the following letter to Mr. Jeremiah J. Sheehan, Chairman and Chief Executive Officer of Reynolds Metals Company (NYSE: RLM):

August 11, 1999

Mr. Jeremiah J. Sheehan
Chairman of the Board and
Chief Executive Officer
Reynolds Metals Company
6601 West Broad Street
Richmond, VA 23261

Dear Jerry:

Late in March our senior management met with you and two of your colleagues to propose a merger of Reynolds and Alcoa. We confirmed the key terms of our proposal in a follow-up letter sent the same day - March 22. As we explained, we thought the strategic logic of our proposal was compelling for Reynolds and its stockholders. We still do - indeed, we think it is even more so.

Our proposal today remains quite simple. We are prepared to acquire all outstanding shares of Reynolds in a transaction in which approximately half of the shares would be exchanged for $65 in cash and the remaining half of the shares would be exchanged for the equivalent value in Alcoa shares (or 0.9784 of a share of Alcoa). As we previously indicated, we are willing to permit all Reynolds stockholders to exchange all of their Reynolds shares for Alcoa shares. Stated differently, we would do the entire transaction for Alcoa shares if your Board or your stockholders find that desirable.

Since our meeting on March 22, both Reynolds and Alcoa announced two quarters of earnings - in the first half Alcoa earned $461.1million or $1.25 per share and Reynolds earned $25 million or $0.40 per share - and both companies have enjoyed a substantial rise in the stock market, although Alcoa's has been more robust (approximately 60% versus approximately 20%). In that same period the ratio of Reynolds' stock price to Alcoa's has gone from 1.124 to 0.841. At the beginning of June you stated publicly Reynolds' intention to "look at significant growth that can be achieved through merger and acquisition activity." You further indicated your belief that our industry "is moving toward global consolidation" in which Reynolds plans to participate. We think those views are entirely congruent with our prior proposal and with our continued desire to negotiate a combination of our two companies using Alcoa common shares as the principal currency of exchange.

Indeed, we believe one of the most compelling features of our proposal is our continued willingness for your stockholders to take Alcoa shares in exchange for their Reynolds shares. According to published figures, Alcoa's five- and ten-year total shareholder returns (with 1999 annualized based on its performance through August 10) are 269.7% and 357.6%. These compare extremely favorably with all of the following comparable figures: Reynolds - 25.2% and 28.6%; S&P Industrials - 191.7% and 292.7%; and S&P 500 - 178.4% and 267.9%. Since 1992 Alcoa's total market capitalization has grown from $6 billion to $24.4 billion. In comparison the other U.S. market traded industry participants achieved the following increases in total market capitalization in that same period: Reynolds - $3.4 billion to $3.6 billion; Kaiser - $.56 billion to $.65 billion; and Alcan - $4.3 billion to $7.3 billion. I have enclosed a separate sheet of bullet points further supporting the proposition that every Reynolds stockholder should want to own Alcoa shares in a combined Alcoa/Reynolds enterprise.

Let me reiterate Alcoa's desire for a negotiated, mutually satisfactory business combination. We have offered Reynolds stockholders the opportunity to keep their equity investment in the combined enterprise, without the need to pay tax on the exchange, at a share exchange ratio which secures the very substantial run-up in the market recently enjoyed by Reynolds shares and which includes a premium to that already substantial market price. Hence, your stockholders can participate in the benefits of all synergies of the combination and any future improvements in metals prices. Moreover, they will have the chance to enjoy the superior growth and returns on capital Alcoa is achieving.

We cannot overemphasize the importance of maintaining stability among employees during the transition period of a business combination, nor can we overstate the attention and effort we will devote to this issue in this transaction. We will integrate your employees harmoniously into the Alcoa family. We have significant experience and have achieved excellent success integrating acquired companies into our group. Most important, we have consistently done so on a basis which new employees have found to be an attractive and secure opportunity. You may expect no less for the Reynolds employees.

Our objective is a transaction that is enthusiastically supported by you and your Board, as well as Reynolds employees, stockholders and your many loyal customers, communities and industry partners. In that spirit, I hope that if you or any of your directors has any questions about our offer, you and they will feel free to give me a call. I must tell you, however, that we feel strongly this is a transaction we must pursue. Accordingly, we have concluded that both our own stockholders and yours should be informed of this proposal, and we have been advised that this is the best legal course of action. Consequently, we will release the text of this letter to the business wires. We also believe this to be a strategic opportunity for both Reynolds and Alcoa that should be pursued expeditiously, especially when we see the rapidly changing profile of our worldwide industry. We therefore feel it appropriate to ask you to respond definitively to this proposal by the close of business on Monday, August 16, after which time we will pursue all other avenues available to achieve a combination of our two companies.


/s/ Alain J. P. Belda


Additional Factors to Consider:

» Two-step merger transaction
» Approximately 1/2 the outstanding Reynolds shares exchanged for $65 in cash
» Remaining shares exchanged for $65 worth of Alcoa stock (or 0.9784 of a share of Alcoa stock)
» Attractive premium
» $65 - 16.33% over yesterday's closing price
» Historical trading ratios - Reynolds/Alcoa*
» 3 years - 1.58
» 2 years - 1.47
» 1 year - 1.24
» 6 months - 1.03
» Alcoa's higher, more consistent margins (Operating Income/Revenues)
1998 11.6%
1997 12.2%
1996 10.8%
1998 7.8%
1997 6.8%
1996 5.9%

» Alcoa's premium price-to-earnings trading multiple
» 18.7 times vs. 14.1 times estimated 2000 net income**
» 15.8 times vs. 13.0 times estimated 2001 net income**
» Alcoa's greater trading liquidity
» Approximately 3.5 times the average daily dollar volume of Reynolds
» Alcoa's superior balance sheet strength
» Reynolds - Baal/BBB
» Alcoa - A1/A+

* Average over period.
** Based on First Call EPS Consensus Estimates.

Alcoa is the world's leading producer of primary aluminum, fabricated aluminum and alumina. It is active in all major segments of the industry: mining, refining, smelting, fabricating and recycling. Alcoa has 215 operating locations in 31 countries. Revenues for all of 1998 were $15.3 billion with record shipments of 3.95 million metric tons of aluminum.