Going South32

Research evidence excerpt

Going South32

Update

July 1, 2026 05:25 AM GMT

Morgan Stanley & Co. LLCMAlcoa Corp | North America Carlos De Alba

Equity Analyst

Going South32 Carlos.De.Alba@morganstanley.comJustin A Ferrer +1 212 761-4927

Research Associate

Justin.Ferrer@morganstanley.com +1 212 761-5246

What's new? Alcoa announced a definitive agreement to acquire South32’s interests

across Worsley/Boddington, Hillside, MRN and Alumar for ~$4.1bn in an upfront Alcoa Corp (AA.N, AA UN)

consideration consisting of $3.1bn cash + ~17.0m newly issued AA shares. We Metals & Mining | United States of America

calculate an implied Enterprise Value of ~$5.9bn including assumed lease-related Stock Rating Overweight

Industry View In-Line

debt of ~US$0.6bn, a CVR (contingent value right) of up to $750m and assumed Price target US$79.00

rehabilitation provisions of US$0.4bn (GAAP accounting). Shr price, close (Jun 30, 2026) US$52.14

Mkt cap, curr (mm) US$13,880

52-Week Range US$84.31-28.12

AA expects the deal to be immediately accretive to EPS and FCF, and to generate ~

$900m of NPV synergies, including ~$50m/year of run-rate cost savings within 12

months of close. Financing is supported by a $3.1bn bridge commitment, which AA

expects to replace with a mix of cash and senior unsecured debt before close.

South32 (covered by Rahul Anand) will receive ~6% ownership of pro forma Alcoa.

The proposed acquisition will require regulatory approvals from the US, Australia,

South Africa, the EU and Brazil.

Valuation: The purchased assets generated an average through-the-cycle EBITDA of

US$834m based on S32's FY21-FY25 results. This would imply an EBITDA of ~US

$884m when including the additional $50m per year in run-rate cost savings/

synergies that AA has identified. Based on our current aluminum price forecasts of ~