South32 has entered into a binding conditional agreement to divest its aluminium value chain assets to Alcoa in a transaction with an implied enterprise value of up to $5.6bn (A$8.12bn).
Under the terms of the transaction, Alcoa will acquire South32’s 86% interest in Worsley Alumina and full ownership of Hillside Aluminium.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
The agreement also includes a 33% stake in the MRN bauxite mine (subject to pre-emptive rights held by MRN’s partners), a 36% share in the Brazil Alumina refinery and a 40% holding in the Brazil Aluminium smelter.
Mozal Aluminium is not included in the transaction and remains under care and maintenance while South32 continues to consider divestment options.
The total consideration consists of $3.1bn in cash, paid upfront, and approximately $1bn in Alcoa shares, amounting to around 17 million shares based on the ten-day volume weighted average price.
Alcoa will also assume around $750m in net debt and lease liabilities as part of the transaction.
There is also up to $750m in contingent cash consideration linked to alumina and aluminium prices through to 2030.
Alcoa will additionally take on related rehabilitation provisions of around $1.2bn.
Completion of the transaction is subject to several conditions.
These include approval by South32 shareholders and clearance from the Australian Foreign Investment Review Board, the Australian Competition and Consumer Commission and the Financial Surveillance Department of the South African Reserve Bank.
Further competition and regulatory approvals are needed, including under the South African Competition Act, alongside other customary conditions.
If conditions are not satisfied or waived by 29 June 2027 or a later agreed date, either party may terminate the agreement.
Upon completion, Alcoa will assume operating control and all current and future liabilities relating to the assets.
Meanwhile, Matt Daley has begun his role as South32 CEO and managing director, marking the completion of a previously announced leadership transition.
Graham Kerr will remain as strategic advisor to assist with matters related to the transaction.
Daley said: “Following completion, our portfolio will be focused on high-quality, long-life assets leveraged to attractive market fundamentals, with approximately 85% of pro-forma EBITDA [earnings before interest, taxes, depreciation and amortisation] from base and precious metals.
“From this strong platform, our peer-leading, funded growth profile is expected to deliver approximately 55% production growth from our Taylor project and Sierra Gorda’s fourth grinding line expansion. Our deep pipeline of copper and zinc growth options in study and exploration phases provide additional upside.”
South32 will receive a ticking fee equal to 5% per annum of the $3.1bn cash component from shareholder approval to completion, payable at completion.
