Alcoa enters binding agreement to acquire Alumina Limited in all-stock deal

Alcoa announced that it has entered into a binding Scheme Implementation Deed with Alumina Limited, under which Alcoa will acquire Alumina Limited in an all-scrip, or all-stock, transaction. The Agreement terms are consistent with the previously agreed and announced transaction process deed. Consistent with the Process Deed, the Alumina Limited Board of Directors has recommended that Alumina Limited shareholders vote in favor of the Agreement in the absence of a superior proposal and subject to an independent expert concluding that the transaction is in the best interests of Alumina Limited shareholders. The Independent Directors of Alumina Limited, and its Managing Director and Chief Executive Officer intend to vote all shares of Alumina Limited held or controlled by them in favor of the Agreement. The terms of the Agreement are consistent with the Process Deed. Accordingly, under the Agreement, Alumina Limited shareholders would receive consideration of 0.02854 Alcoa shares for each Alumina Limited share. Upon completion of the transaction, Alumina Limited shareholders would own 31.25%, and Alcoa shareholders would own 68.75% of the combined company. Based on Alcoa’s closing share price as of February 23, 2024, the last trading day prior to the announcement of the Process Deed, the Agreed Ratio implies a value of A$1.15 per Alumina Limited share and an equity value of approximately $2.2B for Alumina Limited. As part of the Agreement, interests in Alcoa shares would be delivered in the form of CHESS Depositary Interests that represent a unit of beneficial ownership in a share of Alcoa common stock, which would allow Alumina Limited shareholders to trade Alcoa common stock via CDIs on the Australian Stock Exchange. In order to allow the trading of Alcoa CDIs, Alcoa will apply to establish a secondary listing on the Australian Securities Exchange. Alcoa has committed to maintain the CDI listing for at least 10 years. In addition, two new mutually agreed upon Australian directors from Alumina Limited’s Board would be appointed to Alcoa’s Board of Directors upon closing of the transaction. Under the terms of the Agreement and at Alumina’s request, Alcoa has agreed to provide short-term liquidity support to Alumina Limited to fund equity calls made by the AWAC joint venture if Alumina Limited’s net debt position exceeds $420 million. Based on AWAC’s current 2024 cashflow forecast, Alcoa does not expect any support to be required in the 2024 calendar year. Subject to certain accelerated repayment triggers, Alumina Limited would be required to pay its equity calls (plus accrued interest) not later than September 1, 2025 in the event the transaction is not completed. Allan Gray Australia, currently the largest substantial holder in Alumina Limited, has confirmed it continues to be supportive of the proposed transaction. The transaction is expected to be completed in the third quarter 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 from the antitrust regulators in Australia and Brazil. The transaction is not conditional on due diligence or financing.