Alcoa announces deal to acquire Alumina Limited

Alcoa has entered into an agreement on terms and process for the acquisition of Alumina Limited.

In this all-stock transaction, Alumina shareholders would receive consideration of 0.02854 Alcoa shares for each Alumina Limited share. Based on Alcoa’s closing share price as of Feb. 23, it implies an equity value of approximately $2.2 billion for Alumina.

Upon completion of the Agreement, Alumina shareholders would own 31.25 percent, and Alcoa shareholders would own 68.75 percent of the combined company. Under the terms of the agreement, two new mutually agreed upon directors from Alumina’s Board would be appointed to Alcoa’s board upon closing.

Alcoa, based in Pittsburgh, is the sole operator of Alcoa World Alumina and Chemicals (AWAC), a joint venture with Alumina Limited. AWAC consists of a number of affiliated entities that own, operate or have an interest in bauxite mines and alumina refineries in Australia, Brazil, Spain, Saudi Arabia and Guinea. AWAC also has a 55 percent interest in an aluminum smelter in Victoria, Australia. Alcoa owns 60 percent and Alumina Limited owns 40 percent of the AWAC entities, respectively, directly, or indirectly.

The Agreement would increase Alcoa’s economic interest in its core business and simplify governance by acquiring the minority partner in its AWAC joint venture, resulting in greater operational flexibility and strategic optionality. It would also allow Alumina shareholders to participate in the upside potential of a stronger, better-capitalized company with a larger and more diversified portfolio while offering exposure to Alcoa’s upstream aluminum business.

“Alcoa has been a proven operator of AWAC, and we recognize the value creation opportunities possible under a simplified ownership structure, including the ability to implement AWAC’s operational and strategic decisions on an accelerated basis. We believe now is the right time to consolidate ownership in AWAC and look forward to working closely with the Alumina Limited team to consummate a transaction that will better position Alcoa to execute on our long-term growth strategy,” Alcoa President and CEO William Oplinger said.

Specifically, the deal increases Alcoa’s exposure to its core, tier-1 bauxite and alumina business, and provides Alumina shareholders with exposure to Alcoa’s global aluminum business. Further, the acquisition of Alumina would consolidate Alcoa’s ownership of one of the world’s largest bauxite and alumina producers with tier 1 assets. It would significantly increase its ownership in five of the 20 largest bauxite mines and five of the 20 largest alumina refineries globally (excluding China).

Ultimately, it enhances Alcoa’s global position as the leading pure-play upstream aluminum company. It also reaffirms Alcoa’s commitment to Western Australia – a premier global mining jurisdiction.

J.P. Morgan Securities and UBS Investment Bank are acting as financial advisors to Alcoa, and Ashurst and Davis Polk & Wardwell are serving as its legal counsel.