© Reuters. An Alcoa aluminum plant in Alcoa, Tennessee, U.S. is seen in this April 8, 2014 file photo REUTERS/Wade Payne/File Photo
By Echha Jain and Melanie Burton
MELBOURNE (Reuters) -U.S. aluminium producer Alcoa (NYSE:) Corp on Monday made a non-binding, conditional buyout proposal for its Australian joint venture partner Alumina (OTC:), valuing the company at $2.2 billion in an all-stock offer.
The deal raises exposure for the major aluminium maker in the upstream business of aluminium and simplifies governance for both parties. Alumina shareholders will also get exposure to the finished product aluminium in a bigger company.
“To a very large degree it simplifies the corporate structure,” said portfolio manager Simon Mahwhinny of Allan Gray, adding that for that reason it offers the same or more upside for both sets of shareholders.
Allan Gray Australia holds just under 20% of Alumina’s stock which it has agreed to sell to Alcoa, the parties said in a joint statement.
Under the deal, Alumina shareholders would receive 0.02854 shares of Alcoa common stock for each share held. This would imply a value of A$1.15 per Alumina share, based on Alcoa’s closing price as of February 23.
Alumina’s Managing Director and CEO Michael Ferraro intends to recommend shareholders vote in the favour of the proposal, in the absence of a superior proposal, it said.
Alumina’s board also noted that there is no certainty that the proposal would result in a binding takeover offer for the company.
Alumina and Alcoa jointly own Kwinana Alumina Refinery in Western Australia. Alcoa said in January it planned to stop production in 2024 at the loss-making refinery due to challenging market conditions and the facility’s age.
Shares of Alumina had jumped as much as 8.8% to A$1.110 as at 2318 GMT, their biggest intraday gain since Jan 10.
