Alcoa Corporation: Acquires South32’s aluminum value chain assets; sees meaningful synergy potential

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Alcoa Corporation: Acquires South32’s aluminum value chain assets; sees meaningful synergy potential

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Alcoa Corporation

Acquires South32’s aluminum value chain

assets; sees meaningful synergy potential

Maintain Rating: UNDERPERFORM | PO: 57.00 USD | Price: 63.17 USD

Delayed capital returns an offset 02 July 2026

On Tuesday, Alcoa (AA) announced it had entered into a definitive agreement to acquire Equity

South32’s (S32) bauxite, alumina and aluminum operations for $5.45 billion (bn). In our

Lawson Winder, CFA >>

view, the deal strengthens AA’s leadership position in the upstream aluminum value chain, Research Analyst

with substantial (though longer-dated) synergy potential. Valuation appears reasonable on Merrill Lynch (Canada) +1 416 369 7592

an NPV and replacement cost basis but expensive on spot prices (a function of depressed lawson.winder@bofa.com

alumina prices). While the combination is expected to be accretive on an EPS/FCF basis, it Sathish Kasinathan

will meaningfully delay capital returns as AA focuses on accumulating cash (until deal Research Analyst BofAS

close) and deleveraging post close. While in our view the transaction has several positive +1 646 855 2769

aspects, given the delay to capital returns, we maintain our Underperform rating. sathish.kasinathan@bofa.com

Adam Smiarowski, CFA >>

Research AnalystDeal expensive on spot, fine on NPV or replacement cost Merrill Lynch (Canada)

Alcoa will pay $3.1bn cash, issue 17m shares (6% dilution) worth $1.0bn based on 10-day +1 416 369 7780

WVAP (or $0.8bn as of today’s close), assume $0.6bn of lease liabilities, and provide a adam.smiarowski@bofa.com

commodity-linked 4-year Contingent Value Right (CVR) of up to $0.75bn. On a combined value Jason Fairclough >> Research Analyst