On Monday, the U.S. aluminum producer Alcoa Corp. offered its Australian joint venture partner Alumina an all-stock buyout proposal worth $2.2 billion.
The transaction increases the large aluminum producer’s visibility in the aluminum upstream industry and streamlines governance for both sides. Shareholders in Alumina will also be exposed to the final product, aluminum, in a larger business.
“To a very large degree, it simplifies the corporate structure,” according to Simon Mahwhinny, portfolio manager at Allan Gray. The reason is that it provides both groups of shareholders with equal or greater potential.
The parties, in a joint statement, agreed that roughly 20% of Alumina’s stocks held by Allan Grey Australia would be sold to Alcoa.
As per the terms of the contract, each share of Alumina would entitle its shareholders to 0.02854 shares of Alcoa’s common stock. Based on the closing price of Alcoa on February 23, this implies a value of A$1.15 per Alumina share.
In the event that no better proposal is put out, Alumina’s CEO and managing director, Michael Ferraro, plans to advise shareholders to vote in favor of the proposal, the company stated.
The board of Alumina has also acknowledged that there is no assurance that the plan will lead to a legally binding deal to acquire the company.
Kwinana Alumina Refinery is owned by Alcoa and Alumina in Western Australia. The loss-making refinery’s age and the difficult market conditions that it faces will force Alcoa to halt production there in 2024, the company announced in January.
Alumina’s shares increased by 8.8% to A$1.110 as of 23:18 GMT, marking the largest intraday gain since January 10.
- Published By Team Australia News
