Alcoa (NYSE: AA or “Alcoa”) announced today that it has reached a binding Scheme Implementation Deed (the “Agreement”) with Alumina Limited (ASX: AWC), paving the way for Alcoa to acquire Alumina Limited in an all-scrip transaction. The terms of the Agreement align with the previously established transaction process deed (“Process Deed”).

In line with the Process Deed, the Board of Directors of Alumina Limited has recommended that its shareholders approve the Agreement unless a superior proposal emerges. This recommendation hinges on an independent expert's validation, which must confirm and consistently affirm that the transaction aligns with the best interests of Alumina Limited shareholders. The Independent Directors, as well as the Managing Director and Chief Executive Officer of Alumina Limited, intend to vote all shares they hold or control in favor of the Agreement.

William F. Oplinger, President and CEO of Alcoa, expressed that the execution of the Scheme Implementation Deed signifies a significant milestone in their efforts to create value for both Alcoa and Alumina shareholders. He emphasized that the transaction presents opportunities for value enhancement, including bolstering Alcoa’s standing as a prominent bauxite and alumina producer globally, while also providing Alumina Limited shareholders the chance to participate in a more robust, well-capitalized combined entity with growth potential. Oplinger underscored Alcoa's commitment to executing its long-term strategy and building upon its achievements.

The terms of the Agreement are consistent with those outlined in the Process Deed. Consequently, under the Agreement, Alumina Limited shareholders are set to receive 0.02854 Alcoa shares for each Alumina Limited share (the “Agreed Ratio”). Following the completion of the transaction, Alumina Limited shareholders will possess 31.25 percent ownership, with Alcoa shareholders holding the remaining 68.75 percent stake in the merged company.

Based on Alcoa’s closing share price on February 23, 2024, the day preceding the announcement of the Process Deed, the Agreed Ratio suggests a value of A$1.15 per Alumina Limited share, translating to an equity valuation of approximately $2.2 billion for Alumina Limited. Pursuant to the Agreement, Alcoa shares will be issued in the form of CHESS Depositary Interests (“CDIs”), facilitating Alumina Limited shareholders to trade Alcoa common stock through CDIs on the Australian Stock Exchange (“ASX”). Alcoa has committed to maintaining the CDI listing for a minimum of 10 years by seeking a secondary listing on the ASX. Additionally, upon the transaction’s closure, two new mutually agreed Australian directors from Alumina Limited’s Board will join Alcoa’s Board of Directors.

As per the terms outlined in the Agreement and as requested by Alumina, Alcoa has committed to offering short-term liquidity assistance to Alumina Limited. This assistance aims to address equity calls initiated by the AWAC joint venture, in case Alumina Limited's net debt surpasses $420 million. Based on AWAC's cash flow forecast for 2024, Alcoa anticipates no support will be necessary during the calendar year. However, should the transaction not conclude, Alumina Limited would be required to settle its equity calls (plus accrued interest) by September 1, 2025, subject to specified accelerated repayment triggers.

Allan Gray Australia, currently the largest substantial holder in Alumina Limited, has reaffirmed its support for the proposed transaction. The completion of the transaction is anticipated in the third quarter of 2024, subject to customary conditions, approval by both companies’ shareholders, and receipt of necessary regulatory clearances. Regulatory approvals include endorsements from Australia’s Foreign Investment Review Board and antitrust regulators in Australia and Brazil. Notably, the transaction is not contingent upon due diligence or financing.