Alcoa Says Venture Partner Seeking to Block Business Split

  • Partner Alumina says it has ‘serious concerns’ over plan
  • Alcoa sued Alumina in Delaware over bid to scuttle split

Alcoa Inc. said joint-venture partner Alumina Ltd. is threatening to interfere with a plan to split the largest U.S. aluminum producer into two companies unless it grants concessions to the Australian firm.

Alumina officials contend they will block Alcoa’s separation of the manufacturing business from its legacy smelting and refining segment unless a joint-venture agreement between the two companies is revised, Alcoa executives said in a lawsuit.

The Alcoa split is part of a strategy formulated in 2008 by Chief Executive Officer Klaus Kleinfeld after taking over as the 128-year-old company’s top official. With about $5 billion in acquisitions, Kleinfeld has positioned Alcoa to become a leading provider of metal products, such as aluminum parts, for carmakers and gas-turbine producers.

Alumina has “no consent or first-refusal rights in connection with Alcoa’s separation,” the New York-based aluminum producer said in the suit, filed Friday in Delaware Chancery Court. Alumina is Alcoa’s minority partner in Alcoa World Alumina and Chemicals, the world’s largest alumina producer, known as AWAC.

“Our work to execute the separation is continuing,” Monica Orbe, an Alcoa spokeswoman, said in an e-mailed statement. “We have brought this suit preemptively and have high confidence we will win.”

Alumina Defense

Alumina will vigorously defend the proceedings, the Melbourne-based company said Monday in a statement. Discussions with Alcoa on its demerger process began earlier this year and are continuing, it said.

“Alumina has serious concerns that the proposal as described by Alcoa will result in a material adverse change in the nature, size, scope and financial wherewithal of Alumina’s partner in AWAC,” the company said in the statement. The producer “considers it is entitled to receive various offers, including for the Alcoa interest in AWAC companies.”

Alumina officials have threatened to go public with their opposition to Alcoa’s break up in hopes of “casting a cloud over the separation,” Alcoa said in the suit. Alumina also vowed to interfere with Alcoa’s operations by assuming marketing rights it doesn’t have, Alcoa’s lawyers added.

The two companies set up their AWAC joint-venture involving bauxite and alumina mining, along with manufacturing operations, in 1994. Alcoa holds a 60 percent interest while Alumina has 40 percent, according to the suit.

Consent Rights

Alumina says the joint-venture agreement gives it consent rights over Alcoa’s planned break up and it’ll only agree if Alcoa grants “wholly unwarranted and highly valuable concessions” in connection with their joint operations, Alcoa said in court filings.

Alcoa asked a judge to find that the joint-venture agreement doesn’t give Alumina any say over the split and that the separation doesn’t harm the combined company’s operations.

Alumina rose 0.4 percent to A$1.440 at 1:53 p.m. in Sydney trading, for a 24 percent advance this year. Alcoa ended 1.7 percent lower at $9.35 in New York on Friday, having lost 5.3 percent in 2016.

The case is Alcoa Inc. v. Alumina Limited, No. 12385, Delaware Chancery Court (Wilmington)

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