Thoughts on the pending Acquisition of Alumina (AWC)

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Question asked 15/03/2024

Thoughts on the pending Acquisition of Alumina (AWC)

Hi Team,

I am a long time holder of AWC.I should have sold out ages ago and made a nice profit.Got too greedy though. Assuming the recently announced acquisition goes ahead, I have a couple of questions.

Will the new entity still be listed on the ASX? If so, should I hang on and see what happens?

I use to enjoy some Dividends but that has not been the case for a while now. I have quite a few shares and although over the years I have averaged down, I would still be taking a modest loss. Nevertheless, if I sold now I can still carry this forward. I should say I am happy to sell and move on if necessary. If the new parent is going to mean a US listing, I really don’t want to go there. What do you think? I’m always up for a punt so any suggestions would be appreciated. Dividends are nice but so are good capital gains be they short, medium or long term.

Answer

Hi Bob,

To clarify at MM we can only provide General Advice hence some of your question we cannot discuss. However one very relevant point is around averaging and where its appropriate, we adopt a fairly strict rule here:

At MM we only “average” a position unless its part of our original scale in/accumulation plan or there’s a new compelling reason.

We often adopt a scaling “in & out” approach with our position, especially in the cyclical Resources Sector, e.g. Sandfire Resources (SFR) over recent years.

Moving to back to AWC, US aluminium producer Alcoa (AA US), has made an all-scrip bid for ASX listed AWC. The deal will consolidate ownership of the AWAC portfolio of assets, which is 60 per cent owned by Alcoa and 40 per cent owned by Alumina. Eligible Alumina shareholders will be entitled to receive 0.02854 shares of Alcoa common stock (in the form of ASX-listed Alcoa CHESS Depositary Interests (CDIs)) for each Alumina share held.

Post the takeover the new entity will remain on the ASX in a new CDI form after the takeover. The main issue with this is that future dividends will not be franked as they have been in the past. We don’t have any interest in AWC at this point.

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Alumina Ltd (AWC)

LAST UPDATED 13/03/2024 15:30

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