Alcoa Inc. (NYSE: AA, ASX: AAI) has entered into a binding share purchase and subscription agreement with Saudi Arabian Mining Company (Ma’aden) to sell its entire 25.1% ownership stake in their joint venture for approximately $1.1 billion. This deal includes approximately 86 million Ma’aden shares, valued at $950 million based on the volume-weighted average share price over the last 30 days ending on September 12, 2024, and $150 million in cash.

The joint venture, established in 2009, is a fully integrated mining complex in Saudi Arabia, comprising two entities: Ma’aden Bauxite and Alumina Company (MBAC) and Ma’aden Aluminium Company (MAC). Alcoa’s current 25.1% stake will be fully acquired by Ma’aden, which already holds a 74.9% interest. As of June 30, 2024, the carrying value of Alcoa’s investment was $545 million.

Terms of the Agreement and Future Collaboration

Under the terms of the agreement, Alcoa will retain its Ma’aden shares for a minimum of three years, with one-third of the shares becoming transferable after each of the third, fourth, and fifth anniversaries of the transaction’s closing. During this holding period, Alcoa will have the flexibility to hedge and borrow against its shares. Certain conditions may allow for a reduction in this minimum holding period. Following the transaction, Alcoa will own approximately 2% of Ma’aden’s current outstanding shares.

William F. Oplinger, President and CEO of Alcoa, expressed confidence in the new arrangement, stating, “We deeply value our partnership with Ma’aden. We are confident that under the new arrangement, MBAC and MAC are well-positioned for success. The transaction simplifies our portfolio, enhances visibility in the value of our investment in Saudi Arabia, and provides greater financial flexibility for Alcoa, an important part of improving our long-term competitiveness.”

Ma’aden CEO Bob Wilt commented on the ongoing relationship, “Since 2009, Alcoa has been a valued partner of Ma’aden, and our aluminium business has benefited substantially from our strategic partnership. We look forward to future opportunities to collaborate as we continue to build the mining sector into the third pillar of the Saudi economy.”

Regulatory Approvals and Expected Closing

The transaction is subject to regulatory approvals, shareholder approval from Ma’aden, and other customary closing conditions. It is expected to be completed in the first half of 2025. Citi is acting as Alcoa’s exclusive financial advisor, while White & Case LLP is serving as its legal counsel.

Industry Impact and Strategic Positioning

This move is seen as a strategic step by Alcoa to streamline its portfolio and increase financial flexibility, while Ma’aden consolidates its control over the joint venture to further strengthen its position in the global aluminium industry. The deal underscores the continued collaboration between major players in the mining and metals sectors and aligns with Saudi Arabia’s broader economic diversification goals under Vision 2030.

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