Alcoa Makes $2.2 Billion Bid for Australian Rival Alumina

Alcoa, the US-based aluminum giant, has launched a takeover bid for its Australian partner Alumina, offering $2.2 billion in cash for the remaining 60% stake it does not already own. The move is seen as a strategic attempt by Alcoa to gain full control of the world’s largest alumina producer and secure its supply chain amid rising demand and prices for the raw material.
Alumina is a key ingredient in the production of aluminum, which is used in various industries such as aerospace, automotive, construction, and packaging. Alcoa and Alumina have been joint venture partners since 1961, operating 10 alumina refineries and eight bauxite mines across Australia, Brazil, Guinea, and Saudi Arabia. The joint venture, known as Alcoa World Alumina and Chemicals (AWAC), accounts for about 15% of the global alumina market.
Alcoa’s offer, which was announced on Monday, values Alumina at $3.7 billion, or $1.48 per share, representing a 23% premium over its closing price on Friday. Alcoa said the offer was “compelling” and “attractive” for Alumina’s shareholders, as it would provide them with a “certain and immediate” cash return and eliminate the risks and costs associated with the joint venture.
“Alcoa’s offer reflects the strategic importance of AWAC to our business and the value of its world-class assets. By acquiring full ownership of AWAC, we will enhance our operational flexibility, optimize our capital allocation, and create long-term value for our shareholders,” said Roy Harvey, Alcoa’s president and chief executive officer, in a statement.
However, Alumina’s board of directors rejected the offer, saying it was “opportunistic” and “significantly undervalued” the company and its growth prospects. The board said it was confident in the company’s standalone strategy and its ability to benefit from the favorable market conditions for alumina and aluminum.
“Alumina is a resilient and profitable company with a strong balance sheet and a proven track record of delivering value to its shareholders. We have a clear and focused strategy to leverage our unique position as the world’s largest alumina producer and to capitalize on the growing demand and premium pricing for our product,” said John Bevan, Alumina’s chairman, in a statement.
Alumina’s shareholders also expressed their dissatisfaction with Alcoa’s offer, saying it was too low and did not reflect the company’s potential. Some analysts suggested that Alcoa might have to raise its bid or face a rival offer from another suitor, such as China’s Chalco or Rio Tinto.
Alcoa’s bid comes at a time when the global aluminum industry is experiencing a recovery from the impact of the COVID-19 pandemic, which disrupted the supply and demand of the metal. According to the International Aluminum Institute, the global aluminum production increased by 4.6% in 2020, while the global aluminum consumption increased by 1.4%. The prices of alumina and aluminum also rose significantly in 2020, reaching their highest levels since 2018.
Alcoa and Alumina are expected to continue their negotiations in the coming weeks, as they seek to reach a mutually acceptable agreement or face a hostile takeover battle. The outcome of the deal could have significant implications for the future of the global aluminum industry and the Australian economy.

Source: MINING.COM