Alcoa Inc. agreed to buy Australian aluminum company Alumina for $2.2 billion
February 28, 2024
Alumina producer Alcoa Inc (AA.US) has entered exclusive takeover talks with Australian joint venture partner Alumina Ltd (AWCMY.US), following a US $2.2 billion offer. Alcoa said on Monday it had offered to buy Alumina for 0.02854 Alcoa shares for each Alumina share, a 13.1% premium to the share price on Feb. 23. Alumina's board said it plans to support the offer if the two sides reach a definitive agreement after further discussions. Alcoa also agreed to buy a 19.9 percent stake in Alumina from Allan Gray Australia, the company's largest shareholder.
Through a joint venture with Alcoa, Alumina owns about 40 per cent of Alcoa World Alumina & Chemicals(AWAC), the world's largest aluminium producer. Alcoa said in a separate statement that the acquisition, if approved, would increase its exposure to its "tier 1" bauxite and alumina businesses and enhance its global position as a pure-play upstream aluminum producer.
William F. Oplinger, Alcoa's Chief Executive Officer, said: "We recognize the value opportunities that could be created under a simplified ownership structure, including the ability to accelerate implementation of AWAC operational and strategic decisions. We believe now is the right time to consolidate ownership of AWAC."
Alcoa's offer comes about five months after the U.S. aluminum producer appointed Oplinger after its bauxite mining business suffered operational and licensing setbacks in Australia. The problems have forced Alcoa to warn investors that it currently plans to mine lower-grade bauxite in Western Australia until the next mining phase, likely around 2027. Bauxite is a key raw material needed to make aluminum.
The company recently halted production at its Kwinana alumina plant in the region as part of cost-cutting measures being implemented by Oplinger. The plant is the first of the company's three alumina refineries in Western Australia, which have been in operation for about 60 years.
According to Oplinger's website, AWAC has an international network of alumina refineries in Australia, Brazil and Spain, accounting for nearly 10 percent of the world's alumina production. About 90 percent of that alumina is used in smelters that produce aluminum used in transportation, aerospace, construction, construction and packaging, the report said.
Oplinger said it has hired Flagstaff Partners and Bank of America Securities as financial advisers and law firm King & Wood Mallesons as legal counsel. Alcoa said jpmorgan Securities LLC and UBS Investment Bank will serve as its financial advisers, while Ashurst and Davis Polk & Wardwell LLP will serve as its legal advisers.
