US-based aluminium producer Alcoa has proposed a $2.2bn (A$3.36bn) takeover of its Australian joint venture (JV) partner, Alumina.
The non-binding conditional offer aims to consolidate Alcoa's status as one of the world's top bauxite and alumina producers by increasing its stake in high-quality assets.
Under the proposed all-stock deal, Alumina shareholders would receive 0.02854 Alcoa shares for each share they hold, marking a 13.1% premium over Alumina's closing price on 23 February 2024.
Alumina's board of directors intend to recommend the proposed share exchange ratio, provided there is no superior offer, and given that an independent expert deems the deal favourable for Alumina's shareholders.
Allan Gray Australia, Alumina's largest shareholder, has agreed to sell up to 19.9% of Alumina's issued share capital to Alcoa.
If the deal is finalised, Alumina shareholders would hold a 31.25% interest in the merged entity, with Alcoa shareholders owning the remaining 68.75%.
The transaction is expected to enhance Alcoa's economic interest in its principal operations and simplify the governance structure of Alcoa World Alumina and Chemical (AWAC).
AWAC is a JV between Alumina and Alcoa, in which Alcoa currently holds a 60% stake, while the remaining 40% is held by Alumina.
The JV also includes several entities with bauxite mines and alumina refineries across Australia, Brazil, Spain, Saudi Arabia and Guinea. It also has a 55% interest in an aluminium smelter in Victoria, Australia.
This deal is expected to grant Alcoa increased ownership in some of the world's largest bauxite mines and alumina refineries, bolstering its core business.
It also presents Alumina's shareholders with the opportunity to benefit from the prospects of a more robust and diversified company with exposure to Alcoa's upstream aluminium operations.
Alcoa president and CEO William Oplinger said: “We are pleased to have entered into the transaction process and exclusivity deed to finalise the terms of the transaction, which will provide significant and long-term benefits to both Alcoa and Alumina shareholders.
“Alcoa has been a proven operator of AWAC, and we recognise the value creation opportunities possible under a simplified ownership structure, including the ability to implement AWAC’s operational and strategic decisions on an accelerated basis.
“We believe now is the right time to consolidate ownership in AWAC and look forward to working closely with the Alumina Limited team to consummate a transaction that will better position Alcoa to execute on our long-term growth strategy.”
In January this year, Alcoa unveiled its plan to reduce production at the Kwinana Alumina Refinery in Western Australia by 2024.
