U.S. aluminum giant Alcoa revealed an agreement to sell its 25.1% stake in the Ma'aden joint venture to Saudi Arabian mining company Ma'aden for $1.1 billion to simplify its portfolio in Saudi Arabia and enhance financial flexibility.
The consideration includes cash of $150 million and 86 million shares of Ma'aden valued at $950 million based on the volume-weighted average share price of Ma'aden for the last 30 calendar days as of September 12, 2024.
The joint venture (JV), which was created in 2009 as a fully integrated mining complex in the Kingdom of Saudi Arabia, today comprises two entities -- the Ma'aden Bauxite and Alumina Company (MBAC) and the Ma'aden Aluminum Company (MAC). Alcoa currently owns 25.1%, while Ma'aden holds 74.9% remaining stake in the JV.
"We deeply value our partnership with Ma'aden. We are confident that under the new arrangement, MBAC and MAC are well-positioned for success," William Oplinger, Alcoa CEO said in a statement.
"The transaction simplifies our portfolio, enhances visibility in the value of our investment in Saudi Arabia and provides greater financial flexibility for Alcoa," Oplinger added.
Bob Wilt, the CEO of the Saudi Arabian company said, "Since 2009, Alcoa has been a valued partner of Ma'aden, and our aluminum business has benefited substantially from our strategic partnership."
The Alcoa and Ma'aden's JV created the "world's largest, lowest cost fully integrated aluminum facility." The first hot metal was poured in December 2012 and the smelter reached its full capacity in 2015, Alcoa's website stated.
Wilt also noted that they continue to build the mining sector in Saudi Arabia, with a goal of making it a third pillar of Saudi's economy. He also said that they are looking for more opportunities in the future where they could collaborate.
The transaction would be subjected to regulatory approvals and customary closing conditions, including the approval of Ma'aden's shareholders. The deal is expected to close in the first half of 2025.
Alcoa will hold its Ma'aden shares for a minimum of three years, with one-third of the shares becoming transferable after each of the third, fourth and fifth anniversaries of closing of the transaction. During the holding period, Alcoa can hedge and borrow against its Ma'aden shares.
For at least three years, Alcoa would be holding its shares. Once the transaction is completed, it would own roughly 2% of the outstanding shares of Ma'aden.
The Pittsburgh, PA-based company recently proven its toughness when it comes to business. In July, Alcoa posted quarterly revenue of $2.9 billion, beating expectations of $2.8 billion.
For the Ma'aden transaction, Alcoa's exclusive financial advisor is Citi, and its legal counsel is White & Case LLP.
