Alcoa enters into binding agreement to acquire Alumina Limited

On March 11, 2024, 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 favour of the Agreement in the absence of a superior proposal and subject to an independent expert concluding (and continuing to conclude) 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 favour of the agreement.

“Entering into the Scheme Implementation Deed to acquire Alumina Limited is a milestone on our path to deliver value for both Alcoa and Alumina shareholders,” said William F. Oplinger, Alcoa’s President and CEO. “This transaction provides enhanced opportunities for value creation, including strengthening Alcoa’s position as one of the world’s largest bauxite and alumina producers and providing Alumina Limited shareholders the opportunity to participate in a stronger, better-capitalised combined company with upside potential. We look forward to building on Alcoa’s success and continuing to execute our long-term strategy.”

Agreement details

The terms of the Agreement are consistent with the Process Deed. Accordingly, under the Agreement, Alumina Limited shareholders would receive a consideration of 0.02854 Alcoa shares for each Alumina Limited share. Upon completing the transaction, Alumina Limited shareholders would own 31.25 per cent, and Alcoa shareholders would own 68.75 per cent 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 $2.2 billion 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 3, 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 the 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) no 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 that it continues to support the proposed transaction.

Transaction timing & conditions

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.

Transaction website

Associated materials regarding the transaction will be available on the investor relations section of Alcoa’s website at www.alcoa.com, as well as on the transaction website at www.strongawacfuture.com.

Advisors

J.P. Morgan Securities LLC and UBS Investment Bank are acting as financial advisors to Alcoa, and Ashurst and Davis Polk & Wardwell LLP are acting as its legal counsel.