China's Chalco Teams Up With Rio Tinto to Secure Green Aluminum Assets in Brazil

(Yicai) Jan. 30 -- Aluminum Corporation of China, also known as Chalco, said it will team up with Rio Tinto Group to acquire a controlling stake in the Companhia Brasileira de Alumínio (CBA), a major Brazilian producer of the corrosion-resistant metal used in cars and electronics, for BRL4.7 billion (USD903 million), a move aimed at boosting its overseas operations and securing low-carbon aluminum assets.The acquisition will see Chalco and London-headquartered Rio Tinto purchase 68.6 percent of CBA’s issued shares. However, the announcement failed to lift Chalco’s stock price, which fell as much as 10 percent today.Chalco [SHA: 601600; HKG: 02600] closed down 10 percent at CNY14.13 (USD2) apiece in Shanghai and ended the day down 7.9 percent at HKD13.90 (USD1.80) in Hong Kong. Driven by a widening global supply-demand gap for aluminum products, Chalco’s shares have climbed steadily since hitting a low in early April last year, rising nearly 180 percent in Shanghai and reaching an intraday high of CNY15.85 yesterday, the highest since August 2009.In a statement released this morning, Chalco said the joint venture it established in Brazil with Rio Tinto International Holdings Limited has signed an agreement with CBA’s current controlling shareholder to acquire the stake at a cash price of BRL10.50 (USD2) per share. Chalco holds a 67 percent stake in the joint venture, while Rio Tinto holds 63 percent, according to the announcement. Based on the agreed terms, Chalco will pay about BRL3.1 billion for the transaction.After the deal is completed, Chalco plans to launch a mandatory tender offer for all remaining tradable shares of CBA, although it did not disclose the total amount involved. If the offer price remains unchanged, acquiring 100 percent of CBA’s shares would cost an estimated BRL6.8 billion, of which Chalco would bear about BRL4.6 billion.Founded more than 70 years ago, CBA is one of Brazil’s oldest aluminum producers, with primary aluminum output accounting for over one-third of the country’s total. The company is listed on Brazil’s stock exchange under the ticker CBAV3 and operates across the entire aluminum industry chain. Unaudited data show that CBA posted operating revenue of BRL6.6 billion and net profit of BRL393 million (USD75.7 million) in the first three quarters of last year, with net assets of BRL4.7 billion as of the end of the third quarter.Beyond its aluminum assets, CBA also holds stakes in or controls 21 hydropower plants and four wind power plants, giving it an attributable installed capacity of 1.6 gigawatts and annual power generation of about 7 billion kilowatt-hours, all from renewable sources. This has placed CBA’s carbon emissions per ton of aluminum at a leading level globally, Chalco said.Chalco added that the acquisition will not only expand its aluminum production capacity and help establish a new industrial base in Brazil, but also allow it to leverage CBA’s low-carbon and low-cost green energy advantages to improve its environmental, social, and governance performance, as well as its global supply chain integration and international operating capabilities.Editor: Emmi Laine