Alcoa inks binding deal to acquire Australia's Alumina for $2.2 billion

By Rhiannon Hoyle

Alcoa said it has agreed to acquire Alumina in a deal that values the Australian company's equity at roughly $2.2 billion, concluding weeks of talks over a offer that will help to cement the U.S. company as one of the world's largest bauxite and alumina producers.

Pittsburgh-based Alcoa's pursuit of joint-venture partner Alumina represents a bet on commodities expected to play an essential role in the energy transition, with aluminum used in large quantities to manufacture electric vehicles and renewable-power infrastructure.

Alcoa (AA) and Alumina (AU:AWC) said they entered into a binding scheme implementation deed after Alcoa last month announced it would offer 0.02854 of its own stock for each Alumina share.

Alcoa made a number of offers for Alumina before persuading its directors to support a deal. Alumina said its independent nonexecutive directors and chief executive recommend shareholders vote in favor of the proposed takeover.

Global mining has experienced a recent flurry of deals despite concerns about the economic outlook for China, the world's top buyer of many metals, and a slowdown in electric-vehicle sales growth in the U.S. United States Steel (X) agreed in December to be acquired by Nippon Steel (JP:5401) in a $14.1 billion deal. Newmont's (NEM) $15 billion acquisition of Newcrest Mining in November was the largest-ever M&A deal in the gold-mining sector.

Alcoa has long been familiar with Alumina's business. Alumina owns a 40% stake in Alcoa World Alumina & Chemicals, or AWAC, a joint venture with Alcoa that runs or has interests in bauxite mining, alumina refining and aluminum smelting operations in countries from Australia to Brazil and Guinea.

Last month, it said a takeover of Alumina would significantly increase its ownership of five of the world's 20 largest bauxite mines and five of the 20 largest alumina refineries outside of China. It would also make the company less reliant on others for supply to its refineries and better able to withstand swings in commodity prices.

"We believe the time is right to combine our two companies," Alumina Chairman Peter Day said in a statement Tuesday. The combined group will have a larger and stronger balance sheet, and will be better able to fund restructuring and growth plans, he said.

Alumina expects shareholders to vote on the deal at a meeting in the third quarter of 2024, the company said.

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03-11-24 1954ET

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