Demerging Alcoa slams ¡®opportunistic¡¯ Alumina

Relations between Alcoa and Melbourne’s Alumina continue to sour ahead of a legal shootout in September on Alumina’s rights to force a reworking of the global alumina alliance, known as AWAC, between the pair because of Alcoa’s planned demerger.

In a rare Sydney briefing to local investors and analysts hosted by Morgan Stanley, an adviser to Alcoa on its planned demerger in the December half, Alcoa let rip at its partner of 55 years (including Alumina antecedents).

Matt Garth, Alcoa’s vice-president of investor relations, accused Alumina of being emotional and opportunistic in its pursuit of a better deal while Alcoa worked towards its demerger. He accused Alumina of making its initial approaches for a new deal “behind closed doors with the threat that they would take it public”.

Alumina believes Alcoa’s demerger into two companies — one holding the AWAC interest along with some other interests (new Alcoa), and another to be called Arconic to hold the value-add manufacturing and engineered products businesses — triggers “consent” and “first offer’’ rights in its favour under the AWAC arrangements.

As a result, Alumina considers it is entitled to “receive various offers”, including for Alcoa’s (60 per cent) interest in the AWAC companies. Alumina owns the remaining 40 per cent of AWAC, which is managed by Alcoa.

Alcoa went to court in Delaware seeking the orders to stop Alumina making what it claimed are baseless and improper demands, saying it wanted to forestall “continuing threats” to interfere with its demerger plan. The trial starts on September 20.

Mr Garth claimed Alcoa’s lawyers had “written the book on corporate law’’ and had a “very high degree of confidence’’ it would win.

He talked at length on Alcoa’s position. “Alumina does not have a consent right nor does it have a right of first refusal as it relates to our separation.’’

Alumina has said it will vigorously defend the Delaware proceedings. It argues that in its pending demerger, Alcoa is effectively seeking to exit AWAC and introduce a “new and financially weaker entity into the AWAC partnership”.

Mr Garth said that new Alcoa would be a very strong partner for Alumina. Earlier in discussing the separation plan for Alcoa, Mr Garth revealed that the intention was for new Alcoa (housing AWAC) to raise debt and “dividend the cash back to Arconic to get the proper capital structures for both companies”. He also said that Alcoa does not feel bound to achieve an investment grade rating at either company.

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