US aluminium producer Alcoa has agreed to take over Australia-based joint venture (JV) partner Alumina in an all-stock transaction valued at $2.2bn (A$3.33bn).
The acquisition will be executed through a scheme of arrangement, with Alumina reaching a binding SID with Alcoa.
Under the terms of the SID, Alumina shareholders are set to receive 0.02854 shares of Alcoa for each share held.
This swap ratio represents a 19.5% premium over the average exchange ratio of the past 12 months.
Upon deal completion, expected in the third quarter of 2024, Alumina shareholders will own around 31.6% of the merged entity, while existing Alcoa shareholders will own around 68.4%.
To facilitate trading for Alumina's shareholders, Alcoa has committed to establishing a foreign exempt listing on the Australian Securities Exchange (ASX).
This will allow Alumina shareholders to trade Alcoa common stock through Chess Depositary Interests (CDIs) on the ASX.
Additionally, two current Alumina directors who are Australian residents or citizens will join the Alcoa board after completion of the transaction.
The board of Alumina has unanimously recommended that shareholders approve the deal, provided there is no other superior offer.
This recommendation is also contingent on an independent expert conceding that the deal is in Alumina shareholders’ best interests.
The deal is anticipated to bring several benefits to Alumina shareholders, including unified ownership of Alcoa World Alumina and Chemicals (AWAC).
It will also give them exposure to a global upstream aluminium company, and eliminate capital structure inefficiencies present in the current JV.
It is also expected to lead to an improved capital structure, driving potential financial synergies.
Alumina chairman Peter Day said: “We believe the time is right to combine our two companies.
“The combined entity will have a larger and stronger balance sheet, and be better able to fund the current portfolio restructuring actions in AWAC, as well as realising potential growth options in the medium to longer term.
“Alumina shareholders will participate in a leading global pure play upstream aluminium company, with a low carbon smelting portfolio.”
