Alcoa agrees to buy aluminum peer Alumina for $2.2 billion

Investing.com-- Alcoa Corp (NYSE: AA) said on late-Sunday it made a $2.2 billion, all stock offer to take over Australian aluminum producer Alumina Ltd (ASX: AWC) and potentially create one of the world’s largest bauxite and alumina producers.

Pittsburgh-based Alcoa said Alumina shareholders will receive 0.02854 Alco shares for each Alumina share, representing a per-share value of about $.076 based on Alcoa’s last close.

Alcoa shares slipped 0.7% in early New York trading on Monday.

The figure values Alumina at about $2.2 billion, and represents a nearly 13% premium to the firm’s close on Friday. Shares of Alumina rose 4.4% to $1.065 in Australian trade on Monday.

Alumina’s board said that it, along with the top leadership, intend to recommend the takeover offer to shareholders, and that the firm had entered a 20-day exclusivity period with Alcoa for the deal.

The two firms are already part of the the Alcoa World Alumina and Chemical (AWAC) joint venture, which accounts for about a quarter of the world’s alumina supply. Alcoa is the main operator of the venture and holds a 60% stake in the venture.

“Alcoa has been a proven operator of AWAC, and we recognize the value creation opportunities possible under a simplified ownership structure,” Alcoa President and CEO William F. Oplinger said in a press release.

Under the proposed deal, Alcoa will take up a secondary listing on the Australian Securities Exchange. The firm has also entered an agreement with Allan Gray Australia, Alumina’s biggest shareholders, to buy an up to 19.9% stake in Alumina.

"We believe the economic benefits operationally for Alcoa are largely offset by the premium paid, but we do see modest strategic benefits from this transaction," Jefferies analyst Christopher LaFemina said in a note.

Additional reporting by Senad Karaahmetovic

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