Alcoa entered into a binding Scheme Implementation Deed (the “Agreement”) with Alumina Limited, its minority joint venture partner in Alcoa World Alumina and Chemicals (AWAC), under which Alcoa will acquire Alumina Limited in an all-scrip, or all-stock, transaction.
The terms of the Agreement are consistent with the previously agreed and announced transaction process deed (the “Process Deed”).
The Alumina Limited Board of Directors has recommended that Alumina Limited shareholders vote in favor of the transaction in the absence of a superior proposal and subject to an independent expert concluding (and continuing to conclude) that the transaction is in the best interests of Alumina Limited shareholders. The Independent Directors of Alumina Limited’s Board, Managing Director and Chief Executive Officer intend to vote all shares of Alumina Limited held or controlled by them in favor of the transaction.
Under the all-scrip, or all-stock transaction, Alumina Limited shareholders would receive consideration of 0.02854 Alcoa shares for each Alumina Limited share.
This consideration would imply a value of A$1.15 per Alumina Limited share and represents a premium of 13.1%, based on Alcoa’s closing share price on the NYSE on February 23, 2024, of $26.52, the last trading day prior to the announcement of the Process Deed.1
Upon completion of the Agreement, Alumina Limited shareholders would own 31.25 percent, and Alcoa shareholders would own 68.75 percent of the combined company.2
1. Based on the prevailing AUD / USD exchange rate of 0.656 as of February 23, 2024.
2. Based on fully diluted shares outstanding for Alcoa and Alumina Limited as of February 23, 2024.
A Scheme Implementation Deed is a binding agreement for implementation of a ‘scheme of arrangement’, which is the acquisition structure being used for the transaction (as is typical in Australian deals that are recommended by the target’s board). It sets out all of the key terms and conditions whereby Alcoa will acquire Alumina Limited, including obligations on each party to take the necessary steps to implement the scheme of arrangement.
The terms of the Scheme Implementation Deed, or the Agreement, are consistent with the previously agreed and announced Process Deed.
Alcoa is the sole operator of AWAC, its 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 the Portland aluminum smelter in Victoria, Australia.
Alcoa owns 60 percent and Alumina Limited owns 40 percent of the AWAC entities, respectively, directly or indirectly.
This transaction provides Alumina Limited shareholders the opportunity to participate in the upside potential of a stronger, better-capitalized company with a larger and more diversified portfolio. Alumina Limited shareholders gain access to the benefits of Alcoa’s leading pure-play upstream aluminum business.
With ownership of the combined entity, Alumina Limited shareholders will exchange their shares in a non-operating passive investment vehicle for an ownership position in Alcoa.
As part of this transition, Alumina Limited shareholders would participate in Alcoa’s capital returns program, including the current dividend, and would have access to a larger, strong balance sheet that will be better able to fund portfolio actions, maintenance capital, and growth capital.
With a centralized management team and strategy, Alcoa will be better positioned to execute operational and strategic decisions on an accelerated basis. In addition, a simplified corporate structure will result in efficiencies through a reduction in corporate costs.
Alumina Limited has not paid any dividends since September of 2022.
As shareholders in the combined entity, Alumina Limited shareholders will be eligible to participate in Alcoa's capital returns program, including Alcoa’s current dividend. Alcoa’s most recent quarterly dividend was paid on November 17, 2023 and the next will be paid on March 21, 2024. Alcoa’s dividend will not be franked.
Alumina Limited's franking credits will remain with the combined entity and may be utilized for specific purposes in the future.
This transaction is underpinned by strong industrial logic that delivers significant value to Alcoa shareholders.
The transaction would increase Alcoa's financial flexibility, enabling more efficient funding and capital allocation decisions, as well as liability management.
With a centralized management team and strategy, Alcoa will be better positioned to execute operational and strategic decisions on an accelerated basis.
In addition, a simplified corporate structure will result in efficiencies through a reduction in corporate costs.
As part of the Agreement, Alumina Limited shareholders’ interests in Alcoa shares will be delivered in the form of CDIs that represent a unit of beneficial ownership in a share of Alcoa common stock3, which allows Alumina Limited shareholders to trade Alcoa common stock via CDIs on the ASX.
In order to allow the trading of Alcoa CDIs, Alcoa will apply to establish a secondary listing on the ASX. Alcoa currently expects the secondary listing to be represented in ASX indices.
Alcoa sees Australia as an attractive capital market and has committed to maintaining CDIs in Australia for at least 10 years.
3. Each Clearing House Electronic Sub-register System Depositary Interest represents a unit of beneficial ownership in a share of Alcoa common stock.
Business partner interactions, from negotiations to the delivery of materials, will continue to be managed by Alcoa, and it remains business as usual. Our customers and other business partners will continue to be a priority.
With a centralized management team and strategy, Alcoa will be better positioned to execute operational and strategic decisions on an accelerated basis.
The acquisition builds on Alcoa’s industry-leading position and reinforces our commitment to the regions we serve, providing benefits to customers, host communities, and others who rely on the continuing success of our global business.
The transaction increases Alcoa’s economic interest in its core business and simplifies governance by acquiring the minority partner in its AWAC JV, resulting in greater operational flexibility and strategic optionality.
It also allows Alumina Limited 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.
This acquisition builds on our commitment to Western Australia, and provides significant benefits to employees, customers, host communities, and others who rely on the continuing success of our global business.
Under the terms of the Agreement and at Alumina's request, Alcoa has agreed to provide short-term liquidity support to Alumina Limited to fund equity calls made by the AWAC Joint venture if Alumina Limited’s net debt position exceeds $420 million.
Based on AWAC's current 2024 cashflow forecast, Alcoa does not expect any support to be required in the 2024 calendar year.
Subject to certain accelerated repayment triggers, Alumina Limited would be required to pay its equity calls (plus accrued interest) not later than September 1, 2025 in the event the transaction is not completed.
Alcoa intends to move through the transaction closing process in an expeditious manner, including by satisfying customary closing conditions and receiving the necessary approvals.
We expect to satisfy and obtain the necessary conditions and approvals to close the transaction in the third quarter 2024.
As we work through this process, additional information will be made available in our filings with the SEC, including a proxy statement relating to the transaction.
Learn more about our process to close here.
The transaction is subject to the satisfaction of customary conditions and required regulatory approvals, as well as approval by both companies’ shareholders.
There are limited regulatory approvals required from Australia's Foreign Investment Review Board and from the antitrust regulator in Brazil.
The Alumina Limited Board of Directors has recommended that Alumina Limited shareholders vote in favor of the transaction in the absence of a superior proposal and subject to an independent expert concluding (and continuing to conclude) that the transaction is in the best interests of Alumina Limited shareholders. The Independent Directors of Alumina Limited’s Board, Managing Director and Chief Executive Officer intend to vote all shares of Alumina Limited held or controlled by them in favor of the transaction.
The transaction is not conditional on due diligence or financing.
Learn more about our process to close here.