Alcoa's $2.2 Billion Bid for Alumina Limited

Alcoa has proposed acquiring its Australian aluminum partner, Alumina Limited, for $2.2 billion in an all-stock deal. This move aims to increase Alcoa's presence in the global markets for alumina and bauxite, essential raw materials for aluminum production.

Deal Details

Under the terms of the deal, Alumina shareholders will receive 0.02854 Alcoa shares for each Alumina Limited share, translating to a value of 1.15 Australian dollars per share—a premium of around 13% based on Friday's closing prices. Following the transaction, Alcoa shareholders will hold approximately 69% of the combined company, with Alumina owning the remaining 31%.

Alumina's board has recommended that its shareholders approve the deal, after rejecting several previous bids from Alcoa. Citi analyst Alexander Hacking believes that acquiring Alumina would allow Alcoa to consolidate its bauxite and alumina assets and enhance vertical integration, leading to cost efficiencies and better control over upstream raw materials.

Market Response

Investors have shown mixed reactions to the deal, with Alumina stock rising by about 7% in overseas trading to $1.09. On the other hand, Alcoa's stock experienced a 3.2% decline in premarket trading to $25.66. The announcement of the acquisition resulted in some arbitrage trading activity, with Alcoa's current stock price indicating a value of 1.12 Australian dollars per Alumina share—a spread of 3 cents or around 3%.

Stock Movement

While Alcoa's competitor Glencore saw a modest increase of 0.2% in its American depositary receipts, Reliance Steel and Aluminum and Century Aluminum also witnessed slight gains of 0.2% and 0.3%, respectively.

The proposed acquisition of Alumina Limited signifies a strategic move by Alcoa to strengthen its position in the global aluminum market, streamline operations, and optimize costs.