Alcoa announced an agreement with Alumina Limited for an all-stock acquisition. Under the terms, Alumina Limited shareholders would receive 0.02854 Alcoa shares for each Alumina Limited share, implying an equity value of approximately $2.2 billion for Alumina Limited based on Alcoa's closing share price of $26.52 on February 23, 2024. This ratio represents a premium of 13.1% to Alumina Limited's closing share price on the same date.
The acquisition aims to increase Alcoa's economic interest in its core business, simplify governance of the Alcoa World Alumina and Chemicals (AWAC) joint venture, and offer greater operational flexibility. Alcoa is the sole operator of AWAC, which comprises bauxite mines and alumina refineries in Australia, Brazil, Spain, Saudi Arabia, and Guinea. Alcoa currently owns 60% and Alumina Limited owns 40% of AWAC entities. Upon completion, Alumina Limited shareholders would own 31.25% and Alcoa shareholders 68.75% of the combined company.
The transaction is expected to enhance Alcoa's position as one of the world's largest bauxite and alumina producers, significantly increasing its ownership in five of the 20 largest bauxite mines and five of the 20 largest alumina refineries globally (excluding China). Alumina Limited's largest shareholder, Allan Gray Australia, has agreed to grant Alcoa the right to acquire up to 19.9% of Alumina Limited's shares at the agreed ratio. Alcoa CEO William F. Oplinger stated the transaction would provide significant and long-term benefits to shareholders of both companies and accelerate AWAC's operational and strategic decisions.
Alcoa expects to achieve an overhead reduction of approximately $12 million nearly immediately due to the simplification. CEO William Oplinger noted that the acquisition would make Alcoa's equity story simpler for investors by eliminating the complexity of the Alumina Ltd joint venture. The deal is on track to close on August 1, and Oplinger indicated that Alcoa is open to further merger and acquisition opportunities.
