ALUMINA could have a much more pivotal role in determining the ultimate outcome of Alcoa's $33 billion hostile bid for its Canadian rival Alcan than many have assumed.
That's because its powers as a joint venture partner with Alcoa in the Alcoa World Alumina & Chemicals (AWAC) bauxite and alumina business are more sweeping than generally realised.
Alcoa owns 60 per cent of AWAC and Alumina the other 40 per cent. It is intended to house all of the bauxite and alumina interests of the two companies, and the venture is governed by a number of binding agreements. If either Alcoa or Alumina acquires additional bauxite or alumina interests, whether directly or indirectly, then it must be offered to AWAC for purchase at its acquisition cost or, if not separately valued, at an independently determined value.
Thus, if Alcoa were to succeed with its Alcan bid it would have to offer the Canadian group's bauxite and alumina activities to AWAC, and Alumina would be eligible to participate as to 40 per cent. It's suggested the value of those assets is around $5 billion, which would mean that Alumina would need to find around $2 billion if it wished to participate.
What's not so widely known is that the agreement specifies that if Alumina doesn't want Alcan's bauxite and alumina interests then Alcoa would be forced to divest them. That must be regarded as unlikely as Alumina is likely to see an acquisition of Alcan as an opportunity, rather than the reverse.
As the agreement provides that Alcoa and Alumina's bauxite and alumina interests must be within the AWAC joint venture, then it also means that if any party with bauxite and alumina interests were to acquire either Alcoa or Alumina, they would have to offer their bauxite and alumina interests to the other AWAC partner. That's a potent poison pill.
It's doubtful whether the other partner would have the right to force the acquiring party to divest those assets if it didn't want to acquire them, because it would not be a case of either Alcoa or Alumina acquiring bauxite and alumina assets.
Alcoa has long been regarded as a takeover target, with BHP Billiton and Rio Tinto high on the list of potential bidders. Both of course have extensive bauxite, alumina and aluminium interests.
It must be assumed that BHP Billion or Rio Tinto, or for that matter any other potential bidder for Alcoa, would want to split their bauxite and alumina activities with Alumina.
Which suggests that if a bid for Alcoa does eventuate, it's likely it would also be accompanied by a bid for Alumina. That would require another $11 billion or so and would boost the total acquisition cost to between $55 billion and $60 billion. But it would also deliver 100 per cent of AWAC, rather than just 60 per cent.
THE corporate regulator ASIC should take a long, hard look at the $17 billion Cemex bid for Rinker to determine whether the Mexican group has breached its "truth in takeovers" commitment, and also contravened the takeover provisions, in agreeing to allow Rinker holders to retain the recently declared final dividend of 25c a share.
That's because allowing target holders to retain the dividend arguably amounts to an increase in the offer and, if so, that creates a problem because Cemex had already declared its $US15.85 ($19.15) offer price "best and final" in the absence of a superior proposal - thereby ruling out the ability to simply increase the bid.
As to the law, section 650B (1) says a bidder may vary an offer to improve the consideration offered in a number of ways, one of which is to give target holders the "right to retain the whole or part of the dividend, or be paid an amount equal to the amount of the dividend, in addition to the consideration already offered".
And that arguably creates another problem - that allowing Rinker shareholders to keep the final dividend is a variation of the Cemex offer and offers can only be varied by the bidder lodging a notice
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