Historic agreement between Alcoa and Alumina Limited

The multinational Alcoa recently reported that it has reached a binding agreement with Alumina Limited to acquire the company’s shares in an all-stock transaction. This agreement follows the terms previously agreed and announced in the transaction process deed.
As stipulated in the deed of process, the Board of Directors of Alumina Limited has recommended that the shareholders vote in favor of the deal if there is no better offer and provided that an independent expert determines and continues to determine that the transaction is beneficial to the shareholders of Alumina Limited. The Independent Directors and the Chief Executive Officer and Executive Director plan to vote in favor of the Arrangement with all of the shares they own or control in Alumina Limited.

“The signing of the Scheme Implementation Deed to acquire Alumina Limited is a milestone in our journey to deliver value to both Alcoa and Alumina shareholders.” said William F. Oplinger, Alcoa’s president and chief executive officer. “This transaction offers increased opportunities for value creation, including strengthening Alcoa’s position as one of the world’s largest bauxite and alumina producers, and provides Alumina Limited shareholders with the opportunity to participate in a stronger, better capitalized combined company with growth potential. We look forward to building on Alcoa’s success and continuing to execute our long-term strategy.”

According to the Agreement, the terms are compatible with the Deed of Process. Therefore, it is established that the shareholders of Alumina Limited will receive 0.02854 Alcoa shares for each of their shares (Agreed Ratio). Once the transaction is completed, Alumina Limited shareholders will own 31.25% and Alcoa shareholders will own 68.75% of the combined company. Based on the closing Alcoa share price on February 23, 2024, the day prior to the announcement of the Deed of Process, the Agreed Relationship equates to a value of A$1.15 per share for Alumina Limited and a total value of approximately A$2.2 billion for the company.

As part of the agreement, interests in Alcoa shares will be delivered in the form of CDI (CHESS Depositary Interests), which represents one beneficial ownership unit in one share of Alcoa common stock 3. This will allow Alumina Limited shareholders to exchange their shares for Alcoa ordinary shares through the CDI system on the Australian Securities Exchange (ASX). To make this possible, Alcoa will request a secondary quotation on the ASX. In addition, Alcoa is committed to maintain this quotation for at least 10 years.

Two new Australian directors would also be appointed to Alcoa’s Board of Directors after the transaction is completed, following a mutual agreement between the two companies.

Under the terms agreed to in the cited agreement, Alcoa has agreed to provide temporary liquidity assistance to Alumina Limited to fund capital calls made by the AWAC joint venture.

This will only occur if Alumina Limited’s net debt exceeds US$420 million. However, based on current cash flow projections for AWAC in 2024, it is expected that no additional support will be needed during that year. If certain triggers are activated, Alumina Limited will have until September 1, 2025 to pay its principal calls and accrued interest if the transaction is not completed.

Allan Gray Australia, who currently holds the largest number of shares in Alumina Limited, has confirmed its support for the proposed transaction.