Alumina producer Alcoa Corp. has entered exclusive takeover talks with Australian peer and joint-venture partner Alumina Ltd. after making a $2.2 billion offer.
Alcoa has proposed a deal offering 0.02854 of its shares for each of Alumina’s, the company said Monday, marking a 13.1% premium to its share price on February 23. The Australian company’s board said it plans to support the offer if the sides get to a definitive agreement following further diligence.
Alumina owns about 40% of of Alcoa World Alumina & Chemicals, the world’s largest producer of the metal, through a joint venture with Alcoa. The business manufactures alumina, alumina-based chemicals, and aluminum and is sold to mainly to Alcoa’s smelting facilities.
“We recognize the value creation opportunities possible under a simplified ownership structure, including the ability to implement AWAC’s operational and strategic decisions on an accelerated basis,” Alcoa Chief Executive Officer William F. Oplinger said. “We believe now is the right time to consolidate ownership in AWAC.”
Alumina has hired Flagstaff Partners and BofA Securities to act as financial advisers and King & Wood Mallesons as legal adviser it said. JPMorgan 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, the company said.
The offer has also come with support of top Alumina shareholder Allan Gray, which owns nearly 20% of the Australian company, it said in the statement.
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