Alcoa's spin-off plan sparks dispute with Australian partner Alumina

MELBOURNE (Reuters) - Australia's Alumina Ltd AWC.AX on Monday said it has "serious concerns" about the impact of a demerger plan of U.S. partner Alcoa Inc AA.N on the pair's bauxite and alumina production joint venture, Alcoa Worldwide Alumina and Chemicals (AWAC).

An Alcoa aluminum plant in Alcoa, Tennessee is seen in this April 8, 2014 file photograph. REUTERS/Wade Payne/Files

Alumina in a statement said it was concerned the plan would “result in a material adverse change in the nature, size, scope and financial wherewithal of Alumina’s partner in AWAC.”

Alcoa’s plan, disclosed in September, would see it separate out its plane and car parts business under the name Arconic, while its traditional aluminum smelting operations, including its 60 percent stake in AWAC, would retain the Alcoa name.

On Friday, Alcoa filed a lawsuit at the Court of Chancery in the U.S. state of Delaware seeking a declaration that Alumina has no right to block the plan, and has no consent rights or rights of first refusal in relation to the plan.

Alcoa also asked the court to declare its plan does not entitle Alumina to take over marketing rights in AWAC.

“Alumina considers that Alcoa’s demerger proposal triggers consent and ‘first offer’ rights in favor of Alumina under the AWAC arrangements. Alumina will vigorously defend the proceedings brought by Alcoa,” Alumina said in its statement filed at the Australian Securities Exchange.

In its court filing, Alcoa said that following its September announcement it had received letters from Alumina featuring a series of requests.

The requests “include making public statements about the separation and Defendants’ objections to it that would harm Alcoa by casting a cloud over the separation, and disrupting AWAC’s operations by purporting to ‘assume’ marketing rights that Alumina does not have,” Alcoa said in the filing.

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

Alumina has proposed amending AWAC agreements to protect the interests of Alumina shareholders, and said the two sides have been in talks since early this year.

At present, Alumina does not have access AWAC’s cash flows and instead receives a dividend.

Alumina's biggest shareholder is China's CITIC Resources Holdings Ltd 1205.HK, with a 17.9 percent stake.

Alcoa has yet to disclose how it will allocate debt and liabilities, such as pension and closure liabilities, when it splits.

Alcoa’s spokeswoman was not immediately available to comment on Alumina’s statement when contacted by Reuters.

The case is Alcoa Inc v Alumina Limited, Alumina (USA) Inc, and Alumina International Holdings Pty Limited, Case No. 12385-, in the Court of Chancery, Delaware.

Reporting by Sonali Paul; Editing by Christopher Cushing