Alcoa confirmed an agreement to acquire Alumina Limited, announcing an all-stock transaction where Alumina Limited shareholders will receive 0.02854 Alcoa shares for each of their shares. This deal values Alumina Limited at approximately $2.2 billion based on Alcoa's closing share price on February 23, 2024. The acquisition aims to simplify the governance structure of the Alcoa World Alumina and Chemicals (AWAC) joint venture, where Alcoa currently holds a 60% stake and Alumina Limited holds 40%.
The acquisition is expected to streamline Alcoa's upstream aluminum business by increasing its exposure to core, tier-1 bauxite and alumina assets, which include five of the 20 largest bauxite mines and five of the 20 largest alumina refineries globally (excluding China). Alcoa also runs a hydroelectric-powered aluminum smelter in Brazil, and acquired an 18.2% stake in the Mineração Rio do Norte (MRN) bauxite mine from Alcoa to increase its holdings to 33% back in 2023 mining.com, further consolidating its vertically integrated aluminum supply chain. The CEO, William Oplinger, highlighted that the primary reason for the acquisition was to reduce complexity and make the company's equity story more appealing to investors, noting that the deal is on track to close by August 1, 2024.
While the acquisition focuses on simplifying Alcoa's structure and consolidating its ownership in the AWAC JV, it is also expected to result in an overhead reduction of approximately $12 million. The acquisition will allow Alumina Limited shareholders to participate in the potential upside of a stronger, more diversified Alcoa. This strategic move is Alcoa's first major acquisition since its inception in 2016, and the company has indicated that it remains open to further M&A opportunities in the future.
