Alcoa Acquires Alumina Limited in All-Stock Deal

Alcoa Corporation has announced a significant development in its business strategy, as it has entered into a binding agreement to acquire Alumina Limited in an all-stock transaction. This move is expected to result in long-term value creation for both companies’ shareholders. The terms of the agreement specify that Alumina Limited shareholders would receive consideration of 0.02854 Alcoa shares for each Alumina Limited share, and upon completion of the transaction, Alumina Limited shareholders would own 31.25 percent, and Alcoa shareholders would own 68.75 percent of the combined company.

Based on Alcoa’s closing share price as of February 23, 2024, the agreed ratio implies a value of A$1.15 per Alumina Limited share and an equity value of approximately $2.2 billion for Alumina Limited. Moreover, as part of the agreement, interests in Alcoa shares would be delivered in the form of Chess Depositary Interests (CDIs) that represent a unit of beneficial ownership in a share of Alcoa common stock, allowing Alumina Limited shareholders to trade Alcoa common stock via CDIs on the Australian Stock Exchange.

The transaction is expected to be completed in the third quarter of 2024, subject to the satisfaction of customary conditions as well as approval by both companies’ shareholders and receipt of required regulatory approvals. The required regulatory approvals include approvals from Australia’s Foreign Investment Review Board and from the antitrust regulators in Australia and Brazil. The transaction is not conditional on due diligence or financing.

In addition, under the terms of the agreement, two new mutually agreed upon Australian directors from Alumina Limited’s board would be appointed to Alcoa’s board of directors upon closing of the transaction. Furthermore, Alcoa has committed to maintain the CDI listing for at least 10 years, and at Alumina's request, it has agreed to provide short-term liquidity support to Alumina Limited to fund equity calls made by the AWAC joint venture if Alumina Limited’s net debt position exceeds $420 million.

The advisors for this transaction include J.P. Morgan Securities LLC and UBS Investment Bank as financial advisors to Alcoa, and Ashurst and Davis Polk & Wardwell LLP as its legal counsel.

This acquisition represents a significant step for Alcoa in its pursuit of long-term value creation and strengthening its position as one of the world’s largest bauxite and alumina producers. It also provides Alumina Limited shareholders the opportunity to participate in a stronger, better-capitalized combined company with upside potential. The market has reacted to these announcements by moving the company's shares -1.6% to a price of $29.99. For the full picture, make sure to review Alcoa's 8-K report.

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