Alcoa seeks to expand its presence in Australia with $2.2 billion acquisition of Alumina

The U.S. company Alcoa made public on February 25 its plan to purchase the Australian company Alumina Limited, with which it had a previous partnership. If the deal goes through, the owners of Alumina shares will own 31.25% of the company’s shares and will receive a 13% bonus. These discussions will help strengthen Alcoa’s position in the aluminum sector.

It was agreed that Alumina shareholders would receive an amount of 0.02854 Alcoa shares for each Alcoa share held. This agreement would result in an approximate book value of US$2.2 billion, based on the closing price of Alcoa’s shares on the New York Stock Exchange (NYSE) on February 23, 2024.

As part of the proposed purchase, Alcoa plans to create a secondary listing on the Australian Securities Exchange (ASX) for Alumina Limited shareholders to exchange Alcoa ordinary shares via CHESS Depositary Securities (CDI) on the ASX. In addition, two new directors are expected to be appointed to Alumina Limited’s Board of Directors to serve on Alcoa’s Board of Directors in the future.
As part of the agreement, Alcoa and Alumina plan to finalize an agreement to complete the all-stock transaction. Upon completion, Alumina shareholders will hold 31.25% of the combined company and Alcoa shareholders will hold 68.75%.

In this way, Alumina’s management team intends to propose to shareholders that the transaction be completed, provided that no better offer emerges and an independent expert confirms that this remains the most favorable option for shareholders.

Alcoa is also the sole operator of Alcoa World Alumina and Chemicals (AWAC), a joint venture with Alumina Limited, which owns bauxite mines and alumina refineries in several countries. In addition, they have a majority interest in an aluminum smelter located in Australia.
The agreement between Alcoa and Alumina Limited would result in an increase in Alcoa’s economic participation in its core business. In addition, the agreement would simplify management by acquiring a smaller stake in the AWAC joint venture. On the other hand, Alumina Limited’s shareholders would benefit from having exposure to the aluminum business of a stronger, larger capitalized company such as Alcoa.

William F. Oplinger, who is Alcoa’s chairman and chief executive officer, expressed his satisfaction at the announcement of the signing of the exclusivity agreement and the transaction process to finalize the terms of the agreement. Oplinger assured that this transaction will bring great long-term benefits to both Alcoa and Alumina Limited shareholders.

The purchase of Alcoa would be undertaken in order to maintain its commitment to Western Australia and would provide great benefits for employees, customers and local communities that depend on the company’s global success.