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Alcoa (AA) Inks Definitive Deal to Acquire Alumina for $2.2B

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Alcoa Corporation (AA - Free Report) recently finalized a binding Scheme Implementation Deed ("Agreement") to acquire Alumina Limited in an all-scrip or all-stock transaction. The agreement, first announced in February, is expected to be completed in the third quarter of 2024.

Headquartered in Southbank, Victoria, Australia, Alumina invests in bauxite mining, alumina refining and aluminum smelting operations primarily in Australia, Brazil and Spain.

This latest deal highlights the strength of Alcoa’s long-standing partnership with Alumina. Both companies have collaborated as joint venture partners in a refining and smelting business, Alcoa World Alumina and Chemicals (“AWAC”), which operates across multiple countries.

Per the agreed terms, Alumina shareholders will be entitled to receive 0.02854 shares of Alcoa for each share of Alumina, a ratio implying an equity value of about $2.2 billion for Alumina. This distribution will offer Alumina shareholders with an ownership stake of 31.25% in the combined company, while the remaining 68.75% of the stake will be owned by Alcoa shareholders.

Alumina shareholders will obtain Alcoa shares in CHESS Depositary Interests form, which will facilitate them in trading Alcoa shares on the Australian Stock Exchange for a minimum of 10 years.

Alcoa believes this acquisition will strengthen its position as one of the largest bauxite and alumina producers in the world, thus providing better opportunities for value creation. With this buyout, management expects to be less dependent on other suppliers and effectively cater to the increased global demand for aluminum. The transaction will also help AA to effectively manage the current portfolio restructuring actions in AWAC and flourish through better operational focus and financial flexibility.

Zacks Rank & Price Performance

Alcoa, with a $5.5 billion market capitalization, currently carries a Zacks Rank #3 (Hold). The company has been reaping the benefits from higher shipments of alumina, primarily driven by increasing trading activity and shipments across refineries. Also, lower raw materials and decreasing production costs have been supporting the company’s performance.

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The company’s shares have gained 5.9% compared with the industry’s growth of 5.4% in the past six months.

The Zacks Consensus Estimate for AA’s 2024 earnings has declined 41.1% over the last 30 days.

Stocks to Consider

Some better-ranked companies from the Zacks Industrial Products sector are discussed below.

Atmus Filtration Technologies Inc. (ATMU - Free Report) presently sports a Zacks Rank #1 (Strong Buy) and has a trailing four-quarter earnings surprise of 20.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Estimates for ATMU’s 2024 earnings have increased 3.9% in the past 30 days. Shares of Atmus Filtration have risen 16.5% in the past six months.

Parker-Hannifin Corporation (PH - Free Report) presently carries a Zacks Rank #2 (Buy). PH delivered a trailing four-quarter average earnings surprise of 14.4%. In the past 30 days, the Zacks Consensus Estimate for its 2024 earnings has increased 1.3%. Shares of the company have risen 37.6% in the past six months.

Tetra Tech Inc. (TTEK - Free Report) presently has a Zacks Rank of 2. TTEK delivered a trailing four-quarter average earnings surprise of 14.4%. In the past 30 days, the Zacks Consensus Estimate for Tetra Tech’s 2024 earnings has been stable. The stock has increased 15% in the past six months.


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