Alcoa strikes deal with Chinese state-owned CITIC to advance Alumina takeover bid
The US giant says it is on track to complete its takeover of the bauxite and alumina group in coming months after carving a special deal with Chinese state-owned shareholder CITIC.
American aluminium giant Alcoa has altered its takeover deal for Australian bauxite and alumina group, Alumina, to allow a Chinese state-owned entity to convert future shares into non-voting rights to satisfy US regulations.
The company said an affiliate of CITIC will receive the bulk of its Alcoa shares as normal voting shares and a small proportion, about 1.5 per cent of non-voting shares.
This would allow Citic to maintain its monetary interest in Alcoa should the deal proceed, while maintaining compliance with the US Bank Holding Company Act, which prohibits CITIC from holding more than 5 per cent of any class of voting shares in a US public company.
The amendment to the takeover bid announced in March is the result of cooperative discussions with all parties — including CITIC, which holds or controls through its affiliates a 18.9 per cent stake in Alumina — to advance the transaction, which is expected to be completed in the third quarter of 2024.
CITIC has not decided whether it will hold on to its Alumina shares or sell into the takeover, for which it would receive Alcoa shares.
Alcoa chief executive William F. Oplinger said the US giant had a longstanding working relationship with CITIC, which holds a stake in the Portland Aluminium joint venture in Victoria, and the change to the deal would bring it closer to completion.
“The agreed change to the scheme brings us a step closer to completing the transaction, which will provide significant and long-term benefits to both Alcoa and Alumina Limited shareholders,” he said.
The deal consolidates ownership of the Alcoa World Alumina & Chemicals (AWAC) portfolio of assets, which is currently 60 per cent owned by Alcoa and 40 per cent owned by Alumina through a binding Scheme of Arrangement, and will strengthen the 136-year-old company’s position as the one of the largest aluminium and bauxite producers in the world.
AWAC contains five bauxite mines, six alumina refineries, an aluminium smelter and a shipping company in Australia, Brazil, Guinea, Saudi Arabia and Spain.
Its best assets were the Wagerup and Pinjarra alumina refineries south of Perth. It also has a 55 per cent interest in the troubled Portland aluminium smelter in Victoria.
In the offer Alumina shareholders will get 0.02854 Alcoa shares per Alumina share, a 19.5 per cent premium to the average exchange ratio over the last 12 months.
Alumina shareholders on the record date will own about 31.6 per cent of the combined group, and existing Alcoa shareholders will own about 68.4 per cent
The largest shareholder in Alumina, Allan Gray Australia, has continued to support the sale of the Australian company to Alcoa, and as a result the duo have terminated their Conditional Share Sale Agreement in accordance with its terms.
The transaction is expected to be completed in the third quarter of 2024, subject to the satisfaction of customary conditions as well as approval by both companies’ shareholders and receipt of required regulatory approvals.
The required regulatory approvals include approvals from Australia’s Foreign Investment Review Board and Brazil’s antitrust regulator.
The Australian Competition and Consumer Commission has indicated it does not intend to conduct a public review of the Scheme.
The transaction is not conditional on due diligence or financing.
Alcoa is based in Pennsylvania in the US and was founded in 1888. The acquisition will mean Alcoa will significantly increase its ownership in five of the 20 largest bauxite mines and five of the 20 largest alumina refineries globally — excluding China.
At 3.45pm Tuesday shares in Alumina had 1.2 per cent to $1.74.
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