U.S Aluminum Producer Alcoa’s $2.2 Billion Acquisition of Alumina 

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Written By Jackson Hartwell

Alcoa, a prominent US aluminum producer, has recently unveiled its plans to acquire its Australia-based joint venture partner, Alumina, in a significant all-stock transaction valued at $2.2 billion (A$3.33 billion). 

This move marks a strategic step towards consolidating ownership and streamlining operations within the aluminum industry. 

Under the scheme implementation deed (SID), Alumina shareholders stand to benefit from this acquisition, which promises several advantages, including enhanced financial synergies and expanded global reach.

Deal Structure and Terms

The acquisition will be executed through a scheme of arrangement, with Alumina entering into a binding SID with Alcoa. 

Credits: DepositPhotos

As per the terms of the SID, Alumina shareholders will receive 0.02854 shares of Alcoa for each share held, representing a premium of 19.5% over the average exchange ratio of the past 12 months. 

Following the completion of the deal, anticipated in the third quarter of 2024, Alumina shareholders will collectively own approximately 31.6% of the merged entity, while existing Alcoa shareholders will retain around 68.4% ownership.

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Facilitating Trading and Governance

To ensure seamless trading for Alumina shareholders, Alcoa has committed to establishing a foreign-exempt listing on the Australian Securities Exchange (ASX). 

This initiative will enable Alumina shareholders to trade Alcoa common stock through Chess Depositary Interests (CDIs) on the ASX. 

Additionally, two current Alumina directors who are Australian residents are slated to join the Alcoa board post-transaction completion. This move underscores Alcoa’s commitment to maintaining a diverse and inclusive governance structure.

Recommendation and Benefits

The board of Alumina has unanimously recommended that shareholders approve the deal, subject to the absence of any superior offers and independent expert confirmation of its alignment with shareholders’ best interests. 

The proposed acquisition is expected to yield multiple benefits for Alumina shareholders, including consolidated ownership of Alcoa World Alumina and Chemicals (AWAC), exposure to a global upstream aluminum company, and the elimination of capital structure inefficiencies inherent in the current joint venture. 

Furthermore, the merger is poised to enhance the capital structure of the combined entity, paving the way for potential financial synergies.

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Strategic Rationale

Peter Day, Chairman of Alumina, articulated the strategic rationale behind the deal, emphasizing the opportune timing for combining the two entities. 

He highlighted the anticipated advantages of a larger and stronger balance sheet, better equipped to fund portfolio restructuring actions within AWAC, and capitalize on growth opportunities in the medium to long term. 

By participating in a leading global pure-play upstream aluminum company with a low carbon smelting portfolio, Alumina shareholders stand to benefit from the synergies arising from this strategic alignment.

Pivotal Moment in Aluminium Industry 

Alcoa’s proposed acquisition of Alumina signifies a pivotal moment in the aluminum industry, marked by strategic consolidation and operational optimization. 

Credits: DepositPhotos

With a focus on enhancing shareholder value, expanding global reach, and unlocking synergies, this transformative deal holds promise for both Alcoa and Alumina stakeholders. 

As the transaction progresses towards completion, attention will be keenly focused on the realization of anticipated benefits and the creation of long-term value for shareholders in the integrated aluminum enterprise.

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