Alcoa Offers to Buy Out Australian Alumina Partner for $2.2 Billion

Alcoa Offers to Buy Out Australian Alumina Partner for $2.2 Billion

US aluminum giant Alcoa Corp. has proposed to acquire its Australian partner Alumina Ltd. for $2.2 billion in an all-stock deal, aiming to gain full ownership of the world’s largest alumina producer. The deal would also help Alcoa cope with the rising demand and volatile prices of aluminum, which is used in various industries such as transportation, construction, and renewable energy.

The offer represents a 13% premium to Alumina’s closing price on Friday. Alumina’s board said it intends to recommend the deal to its shareholders, subject to further discussions and a definitive agreement. Alcoa has also secured the support of Allan Gray Australia, which owns 19.9% of Alumina.

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Alumina owns 40% of Alcoa World Alumina & Chemicals (AWAC), a joint venture with Alcoa that operates bauxite mines and alumina refineries in several countries. Alumina is a key ingredient in the production of aluminum. By taking full control of AWAC, Alcoa would be able to optimize its upstream operations and benefit from the long-term growth prospects of aluminum.

Alcoa

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Alcoa has been facing operational and financial challenges in its Australian business, due to lower grade bauxite, environmental issues, and cost pressures. In January, it announced the closure of its Kwinana alumina plant in Western Australia, which had been operating since 1963.

The deal is part of Alcoa’s broader strategy to streamline its portfolio and focus on its core aluminum segments. It has also been returning cash to its shareholders through dividends and share buybacks. Alcoa expects the deal to be accretive to its earnings per share and free cash flow in the first year after closing.

The deal is subject to regulatory approvals and other customary conditions. Alcoa expects to announce the winners of the deal by the end of the year.

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Source : yahoo finance

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