Alcoa's Strategic Decision to Divest Stake in Ma’aden

Author: Ryan Hughes Updated: 09-15-2024 09:28 AM

Alcoa Moves to Sell Stake in Ma’aden Joint Venture

Alcoa (NYSE: AA) has taken a significant step in its strategic decision-making by entering into an agreement with Saudi Arabian Mining Company (Ma’aden) to sell its entire 25.1% stake in the Ma’aden Joint Venture. This agreement involves a transaction valued at approximately $1.1 billion, which includes the exchange of roughly 86 million shares of Ma’aden and an additional cash payment of $150 million.

Details of the Transaction

The transaction is structured around a share purchase and subscription agreement that reflects Alcoa's commitment to enhancing its financial flexibility and simplifying its portfolio. According to the latest financial assessments, Alcoa's shares in Ma’aden—valued at about $950 million based on recent trading performance—represent a significant aspect of its investment strategy.

The Joint Venture's Legacy

Initially formed in 2009, the Ma’aden Joint Venture has evolved into an integral component of Alcoa's operations—comprising two key entities: the Ma’aden Bauxite and Alumina Company, which oversees bauxite mining and alumina refining, and the Ma’aden Aluminium Company, responsible for aluminum smelting and casthouse operations. With Alcoa currently holding 25.1% of this venture and Ma’aden owning the rest, the structural decision marks a transformative phase for both partners.

Future Plans for Alcoa

As part of this agreement, Alcoa will maintain its shares in Ma’aden for a minimum of three years, unable to transfer one-third of the shares after each of the third, fourth, and fifth anniversaries of closing. During this holding period, the company retains the opportunity to hedge and borrow against its shares, ensuring a level of financial maneuverability.

Statements from Leadership

William F. Oplinger, Alcoa’s President and CEO, expressed pride in the partnership with Ma’aden, stating, "We deeply value our partnership with Ma’aden. We are confident that under the new arrangement, MBAC and MAC are well-positioned for success. This transaction not only simplifies our portfolio but also enhances visibility in our investments and provides greater financial flexibility to ensure our long-term competitiveness."

Bob Wilt, the CEO of Ma’aden, echoed these sentiments, noting the mutual benefits gained over the years from their collaboration. "Since 2009, Alcoa has been a valued partner of Ma’aden, and our aluminium business has benefited substantially from our strategic partnership. We anticipate future opportunities for collaboration as we strengthen the mining sector in Saudi Arabia."

Regulatory Considerations and Next Steps

The successful completion of this transaction hinges upon receiving necessary regulatory approvals and shareholder consent from Ma’aden, along with fulfilling other pertinent closing conditions. Both companies are optimistic about the acquisition closing in the anticipated time frame, targeting completion within the first half of 2025.

Advisory and Legal Counsel

In conjunction with the transaction, Citi has been appointed as Alcoa’s exclusive financial advisor, with White & Case LLP serving as its legal counsel. This arrangement showcases Alcoa's proactive measures to navigate this significant change in its investment landscape.

About Alcoa Corporation

As a global leader in bauxite, alumina, and aluminum production (NYSE: AA), Alcoa continues to push boundaries in the industry while striving for a sustainable future. By maintaining a values-based operational approach, Alcoa focuses on integrity, operational excellence, and community engagement to drive meaningful progress in metal production.

Frequently Asked Questions

What will happen to Alcoa’s 25.1% stake in Ma’aden?

Alcoa will divest its full ownership interest in the Ma’aden Joint Venture under a binding agreement, marking a significant shift in its investment strategy.

How much is the transaction valued at?

The transaction is valued at around $1.1 billion, consisting of shares and cash terms.

What was the joint venture established for?

The joint venture was established to create a fully integrated mining complex in Saudi Arabia, involving bauxite mining, alumina refining, and aluminum production.

What is the holding period for the Ma’aden shares?

The holding period for Alcoa’s Ma’aden shares is a minimum of three years, with transferability conditions outlined in the agreement.

Who are the advisors for this transaction?

Citi is serving as Alcoa’s exclusive financial advisor, while White & Case LLP provides legal counsel for the transaction.

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