Alcoa to acquire Alumina Limited in strategic all-stock deal worth $2.2bn

Alcoa Corporation (NYSE: AA) and Alumina Limited (ASX: AWC) have officially announced a significant development in their corporate relationship, signaling a strategic consolidation in the metals sector. Under a binding Scheme Implementation Deed, Alcoa will acquire Alumina Limited through an all-scrip (all-stock) transaction, a move that not only reshapes the landscape of the aluminum industry but also highlights the ongoing trends of strategic mergers and acquisitions within the global economy.

The cornerstone of this agreement lies in the exchange ratio, which has been set at 0.02854 Alcoa shares for each Alumina Limited share. This exchange ratio translates to an implied value of approximately A$1.15 per Alumina Limited share, culminating in an equity value close to $2.2 billion for Alumina Limited based on Alcoa’s last closing share price before the announcement. Post-transaction, Alumina Limited shareholders are set to own a 31.25% stake in the newly combined entity, with the remaining 68.75% held by Alcoa shareholders.

A notable aspect of this merger is the strategic alignment it brings to both companies. Alcoa, renowned as one of the world’s leading bauxite and alumina producers, stands to solidify its market position through this acquisition. The merger promises to unlock enhanced value creation opportunities, leverage operational synergies, and provide Alumina Limited shareholders with a chance to partake in the prospects of a larger, more financially robust entity.

The Agreement stipulates that interests in Alcoa shares will be conveyed in the form of CHESS Depositary Interests (CDIs), facilitating Alumina Limited shareholders’ ability to trade Alcoa shares on the Australian Securities Exchange (ASX). This provision ensures a seamless transition and maintains liquidity for shareholders, underpinned by Alcoa’s commitment to uphold the CDI listing for at least a decade.

Governance changes are also on the horizon, with two new directors from Alumina Limited’s Board set to join Alcoa’s Board upon transaction completion. This move is aimed at fostering continuity and leveraging the expertise of Alumina Limited’s leadership within the expanded company.

The transaction’s completion hinges on several conditions, including the approval from shareholders of both companies and the green light from regulatory bodies such as Australia‘s Foreign Investment Review Board and antitrust regulators in Australia and Brazil. The projected timeline for finalizing the merger points to the third quarter of 2024, subject to fulfilling these conditions.

William F. Oplinger, President and CEO of Alcoa, remarked on the transaction’s strategic benefits, stating, “Entering into the Scheme Implementation Deed to acquire Alumina Limited is a milestone on our path to deliver value for both Alcoa and Alumina shareholders.” His statement encapsulates the optimistic outlook shared by the leadership of both companies, underscored by their unanimous recommendation for shareholders to endorse the agreement.

This merger is poised to reshape the dynamics of the aluminum industry, enhancing Alcoa’s footprint while offering Alumina Limited’s shareholders a stake in a more formidable industry player. As the global economy continues to witness a trend towards consolidation, the Alcoa-Alumina Limited merger serves as a testament to the strategic shifts companies are making to navigate the complexities of the market and unlock shareholder value.