U.S. aluminium producer Alcoa (AA.N), opens new tab on Monday made a $2.2 billion all-stock buyout proposal for its Australian joint venture partner Alumina (AWC.AX), opens new tab, in a deal that would give it greater upstream exposure and simplify its operations.
Alumina's only asset is a 40% stake in the Alcoa World Alumina and Chemicals (AWAC) joint venture, which is controlled by Alcoa and has interests in bauxite mining, alumina refining and aluminium smelting across Australia, Brazil, Spain, Saudi Arabia and Guinea.
Alcoa CEO William Oplinger told analysts the deal would eliminate Alumina's A$12 million ($7.87 million) a year of overhead costs and allow the combined company to tap tax advantages related to holding debt.
The broader global footprint will also allow Alcoa more options for growth, he added.
Under the proposed deal, Alumina shareholders would receive 0.02854 shares of Alcoa common stock for each share held, giving them a 31% stake in the combined company. This would imply a value of A$1.15 per Alumina share, based on Alcoa's closing price as of Friday.
Alumina shares closed 7 Australian cents higher at A$1.09 on Monday.
The Melbourne-based company said its board backed the deal in the absence of a superior offer, though it also noted there was no certainty the proposal would be made binding.
Alumina's largest shareholder, investment manager Allan Gray Australia, holds just under a 20% stake in the company, which it said it had agreed to sell to Alcoa.
"To a very large degree it simplifies the corporate structure," portfolio manager Simon Mahwhinny of Allan Gray said of the deal.
Alumina was created from a 2002 de-merger of WMC Ltd's alumina assets and an Alcoa buyout has been viewed as logical by analysts for more than two decades.
AWAC also has a 55% interest in the Portland aluminum smelter in Australia with China's CITIC Resources (1205.HK), opens new tab and Japan's Marubeni (8002.T).
Source: Reuters
