Alcoa announced it is buying Australia-based Alumina Limited in an all-stock $2.2 billion deal. This deal will make Alcoa one of the largest producers of alumina and bauxite.
Acquiring Alumina gives Alcoa full control of the joint venture between the two companies. Following the closing of the deal, Alumina’s shareholders will own roughly 31.6% of the combined entity, and Alcoa shareholders will hold the remaining 68.4%.
Alumina’s board, including the company’s Managing Director and CEO, recommended that shareholders vote in favor of the deal because a superior proposal was unavailable.
Alcoa originally announced it was planning to buy Alumina Limited on February 25 as it was subject to entry into a scheme implementation agreement.
Alcoa cited several strategic and financial benefits. For example, this deal will increase Alcoa’s exposure to its core tier-1 bauxite and alumina business and offer Alumina Limited shareholders exposure to Alcoa’s global aluminum business.
This acquisition of Alumina Limited would consolidate Alcoa’s ownership of one of the world’s largest bauxite and alumina producers with tier 1 assets. Through this acquisition, Alcoa would significantly increase its ownership in 5 of the 20 largest bauxite mines and 5 of the 20 largest alumina refineries globally (excluding China).
This deal complements Alcoa’s low-carbon, global smelting portfolio, which has the fifth-largest global production (excluding China). Alumina Limited shareholders gain access to the benefits of Alcoa’s upstream aluminum business.
This deal will enhance Alcoa’s global position as a leading pure-play upstream aluminum company. And a combination of Alcoa and Alumina Limited would enhance Alcoa’s vertical integration across the value chain, with leading positions in bauxite, alumina and aluminum smelting and casting (excluding China).
AWAC’s mining operations are located strategically near AWAC refineries and major Atlantic and Pacific markets. Alcoa’s smelters are strategically placed near key markets in North America and Europe. This increased vertical integration in a combined company offers more stability throughout the commodity cycle.
This deal increases Alcoa’s financial flexibility, enabling more efficient funding, capital allocation decisions, and liability management. And Alcoa would be better positioned to achieve many of its long-term strategies for maximizing shareholder value creation. This includes returning cash to shareholders, increasing portfolio exposure to Alcoa’s highest margin and highest return on capital business, and positioning for growth with the ability to make decisions on a streamlined basis. Also, acquiring Alumina Limited increases Alcoa’s financial flexibility for its Western Australia mining projects and near-term portfolio actions.
This deal reaffirms Alcoa’s commitment to Western Australia, a premier global mining jurisdiction. Alcoa has a notable track record in the tier-1 Western Australia mining jurisdiction. This deal builds on Alcoa’s commitment to continued productive relationships based on engagement with local communities, significant employment, and improved environmental performance.
J.P. Morgan Securities LLC and UBS Investment Bank are Alcoa’s financial advisors, and Ashurst and Davis Polk & Wardwell LLP are its legal counsel.
KEY QUOTES:
“Entering into the Scheme Implementation Deed to acquire Alumina Limited is a milestone on our path to deliver value for both Alcoa and Alumina shareholders. This transaction provides enhanced opportunities for value creation, including strengthening Alcoa’s position as one of the world’s largest bauxite and alumina producers and providing Alumina Limited shareholders the opportunity to participate in a stronger, better-capitalized combined company with upside potential. We look forward to building on Alcoa’s success and continuing to execute our long-term strategy.”
– William F. Oplinger, Alcoa’s President and CEO
