US Alcoa to buy Aussie Alumina for $2.2b

US aluminium producer Alcoa has proposed a $2.2 billion all-stock buyout of its Australian joint venture partner Alumina, Reuters reported on Monday. This deal would provide Alcoa with greater exposure to upstream operations and simplify its overall business structure.

Alumina’s sole asset is a 40 per cent 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 various countries.

Alcoa CEO William Oplinger stated that the acquisition would result in the elimination of Alumina’s A$12 million ($7.87 million) annual overhead costs and enable the combined entity to take advantage of tax benefits related to holding debt.

As per agreement, Alumina shareholders would receive 0.02854 shares of Alcoa common stock for each share held, giving them a 31 per cent ownership in the merged entity. Based on Alcoa’s closing price on Friday, this would equal a value of A$1.15 per Alumina share

On Monday, Alumina shares closed at A$1.09, up by 7 Australian cents.

Alumina was formed in 2002 through the de-merger of WMC Ltd’s alumina assets. Analysts have considered an Alcoa buyout to be a logical move for more than 20 years.

Additionally, AWAC holds a 55 per cent stake in the Portland aluminum smelter in Australia, in partnership with China’s CITIC Resources and Japan’s Marubeni.