Alumina, an Australian powerhouse in bauxite and alumina production, has officially accepted a $3.3 billion all-scrip offer from its US joint venture partner, Alcoa. This strategic move is set to consolidate the ownership of the Alcoa World Alumina & Chemicals (AWAC) assets, further solidifying Alcoa's status as a leading producer in the aluminium and bauxite industry on a global scale.
Currently, Alcoa holds a 60% stake in AWAC, with Alumina Limited owning the remaining 40%. The AWAC portfolio boasts an impressive range of assets, including five bauxite mines, six alumina refineries, an aluminium smelter, and a shipping company spread across Australia, Brazil, Guinea, Saudi Arabia, and Spain. Highlighted among its top assets are the Wagerup and Pinjarra alumina refineries located south of Perth, along with a significant stake in Victoria's Portland aluminium smelter.
The Board of Alumina, established in 2002 following a spin-off from Western Mining, has endorsed the transaction to its shareholders, recommending acceptance in the absence of a better offer. Alumina's chairman, Peter Day, emphasized the timely nature of this amalgamation, citing enhanced financial stability and growth prospects as key benefits for both entities involved.
Shareholders of Alumina are set to receive 0.02854 Alcoa shares for each share they hold, marking a 19.5% premium over the past year's average exchange ratio. Upon completion, Alumina's shareholders will possess approximately 31.6% of the merged company, with the remaining 68.4% held by existing Alcoa shareholders.
Alcoa has committed to creating a foreign exempt listing on the ASX, facilitating trading of Alcoa common stock for Alumina shareholders. Additionally, two Alumina directors, who are Australian residents or citizens, will be appointed to Alcoa's board as part of the agreement.
The deal also includes a provision for short-term liquidity support from Alcoa to Alumina Limited, ensuring the latter can meet equity calls from the AWAC joint venture without exceeding a net debt threshold of $420 million.
Alumina's principal shareholder, Allan Gray Australia, has expressed its backing for the merger, agreeing to allow Alcoa the option to acquire up to 19.9% of Alumina shares. Meanwhile, the stance of the CITIC Group, a major Chinese investor holding a 19% stake in Alumina, remains undisclosed.
