Elliott Management Target In Trouble

Elliott Management Target In Trouble

Australia’s Alumina Ltd has “serious concerns” about the impact of the demerger plan for its partner Alcoa (NYSE: AA), looking to block the Alcoa’s breakup plan. The two have a joint venture in a bauxite and alumina operation called AWAC.

Alumina is concerned the plan will “result in a material adverse change in the nature, size, scope and financial wherewithal” of Alcoa. AA has yet to disclose how it would allocate debt and liabilities, such as pension and closure liabilities when it splits.

AA’s breakup, supported by activist investor Elliott Management, would separate the company’s plane and car parts business under the name Arconic while the traditional aluminum smelting operations, including the 60 percent stake in the Alumina joint venture, would retain the Alcoa name.

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Alcoa  – lawsuit

AA has countered with a lawsuit at the Court of Chancery in Delaware, noting that Alumina has no right to block the plan and has no consent rights or rights of first refusal. Alcoa says, “We look forward to putting this matter behind us and launching new Alcoa and Arconic in the second half of 2016.”

AA said its demerger plan was similar to when Alumina Ltd. split from Western Mining Corp. more than a decade ago when Alcoa had no rights of first refusal or right to block the split under AWAC agreements.

Alumina has proposed amending the AWAC agreements to protect the interests of its shareholders and said the two sides have been in talks since early this year. Alumina does not have access to AWAC’s cash flows and instead receives a dividend.

Alumina’s biggest shareholder is China’s CITIC Resources Holdings Ltd, with a 17.9 percent stake.

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