Underperforming Alcoa aims to close one of its WA alumina refineries and purchase the 40% it doesn’t own in its global network held by the listed company Alumina (ASX:AWC).
Alcoa is proposing a share exchange, despite its shares losing over 20% in value in the first 8 weeks of this year, trailing the S&P 500, which has gained 7%.
Alumina shares, on the other hand, have surged over 9%, outperforming the wider Australian market.
Alumina currently holds 40% of AWAC (Alcoa World Alumina and Chemicals), while Alcoa manages the enterprise and owns the remaining 60%.
Alumina announced Monday that it had received a non-binding offer from Alcoa to acquire all its shares.
The offer proposes exchanging 0.02854 Alcoa shares for each Alumina share. Alcoa's shares closed at $US26.52 on Wall Street on Friday, marking a 4% decline for the day and a year-to-date loss of 20.4%.
Alumina shares closed last week down 2.86% at $1.02, reflecting a staggering 968% increase year-to-date.
Alumina claims the offer represents a 13% premium over Friday’s closing price for its shares.
Alcoa, controlling 60% of the venture, should be well-informed about Alumina.
The Alumina Board, after reviewing the proposal, intends to recommend it to shareholders, provided no superior proposal arises and an independent expert deems it in their best interests.
To prevent a shareholder from blocking the bid as AustralianSuper did with Origin, Alcoa has reached a conditional deal with Alan Gray fund managers to acquire their 19.9% stake in Alumina at the offer value.
At Friday’s close, Alumina was valued at $A2.96 billion, a paper offer that could raise it to $A3.34 billion, with Allan Gray potentially receiving Alcoa shares worth over $A600 million. However, given the recent share price decline, would Allan Gray be interested?
