Aluminum producer Alcoa (NYSE:AA) has entered exclusive takeover talks with its Australian joint-venture partner Alumina Limited (ASX:AWC), after making a US$2.2 billion offer.
Alcoa (NYSE:AA) has offered 0.02854 of its shares for each of Alumina’s, marking a 13.1% premium to its share price on Feb. 23. The Australian company’s board said it plans to support the offer if the sides get to a definitive agreement following further discussions. Alcoa is also planning to buy a 19.9% stake in Alumina from biggest shareholder Allan Gray Australia.
Alumina owns around 40% of Alcoa World Alumina & Chemicals (AWAC), the world’s largest producer of the metal, through a joint venture with Alcoa. If approved, the takeover will increase its exposure to “tier-1” bauxite and alumina businesses and boost its global position as a pure-play upstream aluminum producer, Alcoa said in a statement.
Alcoa chief executive officer William F. Oplinger said: “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.”
Alumina’s shares were last trading about 7% higher intra-day in Sydney on Monday, at A$1.09.
Operational struggles
The American company’s takeover offer comes about five months after it appointed Oplinger amid struggles with operational and permitting setbacks in Australia for its bauxite mining business.
The challenges compelled Alcoa to caution investors about its intention to extract bauxite of lower quality, a pivotal ingredient in aluminum production, in Western Australia until the commencement of its subsequent mining phase, potentially around 2027.
Recently, the company ceased operations at its Kwinana alumina facility in the area, as part of cost-saving initiatives overseen by Oplinger. This facility marked the inaugural of Alcoa's three alumina refineries in Western Australia, each with a tenure spanning approximately six decades.
According to Alumina's website, AWAC operates a global network of alumina refineries across Australia, Brazil, and Spain, contributing to nearly 10% of the world's alumina output. The majority of this alumina, approximately 90%, is utilized in smelters for the production of aluminum, supporting various industries such as transportation, aerospace, construction, and packaging.