Copyright Getty Images, Alex Wong
Alcoa CEO Klaus Kleinfeld

Alcoa Says Joint Venture Partner Trying to Block Business Split

May 27, 2016
Alumina has “no consent or first-refusal rights in connection with Alcoa’s separation,” Alcoa said in a lawsuit filed Friday.

Alcoa Inc. says joint-venture partner Alumina Limited is threatening to interfere with a plan to split the largest U.S. aluminum producer into two companies unless it grants concessions to the Australian firm.

Alumina officials contend they will block Alcoa’s separation of the manufacturing business from its legacy smelting and refining segment later unless a joint-venture agreement between the two companies is revised, Alcoa executives said in a lawsuit.

The split is part of a strategy formulated in 2008 by Chief Executive Officer Klaus Kleinfeld after taking over as the 128-year-old company’s top executive. With about $5 billion in acquisitions, Kleinfeld positioned Alcoa to become a leading provider of metal products, such as aluminum parts, for carmakers and industrial gas-turbine producers.

Alumina has “no consent or first-refusal rights in connection with Alcoa’s separation,” the New York-based aluminum producer said in the suit, filed Friday in Delaware Chancery Court.

“Our work to execute the separation is continuing,” Monica Orbe, an Alcoa spokeswoman, said in an e-mailed statement. “We have brought this suit pre-emptively and have high confidence we will win.”

Charles Smitheram, an Alumina spokesman, didn’t immediately respond to an e-mail, sent outside regular business hours in Australia, seeking comment on Alcoa’s lawsuit.

Cast a Cloud

Alumina officials have threatened to go public with their opposition to Alcoa’s break up in hopes of “casting a cloud over the separation,” Alcoa said in the suit. Alumina, based Melbourne, also vowed to interfere with Alcoa’s operations by assuming marketing rights it doesn’t have, Alcoa’s lawyers added.

The two companies set up a joint-venture involving bauxite and aluminum mining, along with manufacturing operations, in 1994. Alcoa holds a 60% interest in the venture while Alumina has the remaining 40%, according to the suit.

Alumina says the joint-venture agreement gives it consent rights over Alcoa’s planned break up and it’ll only agree if Alcoa grants “wholly unwarranted and highly valuable concessions” in connection with their joint operations, Alcoa said in court filings.

Alcoa asked a judge to find the joint-venture agreement doesn’t give Alumina any say over the split and the separation doesn’t harm the combined company’s operations.

The case is Alcoa Inc. v. Alumina Limited, No. 12385, Delaware Chancery Court (Wilmington)

By Jef Feeley

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