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Alcoa makes $2.2 billion bid for Australian partner Alumina

Written by Stephanie Ritenbaugh

Pittsburgh-based aluminum company Alcoa wants to acquire its Australian partner, Alumina Limited, in an all-stock deal valued at $2.2 billion.

The proposal is at a 13.1% premium to the share price of Alumina on Feb. 23 and implies a 19.5% premium based on the average exchange ratio over the last 12 months, according to Alumina.

Through the deal, Alcoa aims to grow its upstream exposure.

The two companies already work together. Alcoa is the sole operator of a joint venture with Alumina dubbed Alcoa World Alumina and Chemicals (AWAC), which operates or has interest in bauxite mines and alumina refineries in Australia, Brazil, Spain, Saudi Arabia and Guinea. The joint venture, of which Alcoa owns 60%, also has a 55% interest in a smelter in Victoria, Australia.

A deal would enable Alcoa to consolidate its ownership of one of the world’s largest bauxite and alumina producers with Tier 1 assets. Alcoa would significantly increase its ownership in five of the 20 largest bauxite mines and five of the 20 largest alumina refineries globally, excluding China.

In turn, a merger would give Alumina Limited greater 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,” said William F. Oplinger, Alcoa’s President and CEO. “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.”

If the agreement is completed, Alumina shareholders would own 31.25% of the combined company.

The deal would also simplify Alcoa’s operations and reduce corporate costs, particularly in its AWAC operations, the U.S. company said.

Alumina Limited said it plans to recommend that shareholders accept the deal in the “absence of a superior proposal.”

Alumina Limited’s largest holder, Allan Gray Australia, has struck an agreement with Alcoa to acquire up to 19.9% of Alumina Limited.

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