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Alcoa is set to acquire Alumina Limited in a deal that will cement the major as one of the world’s largest alumina producers.

After weeks of talks, Alumina announced it has entered into a binding scheme implementation deed, which will see its shareholders receive 0.02854 shares of Alcoa common stock for each Alumina share held.

The proposal prices Alumina at a 19.5 per cent premium based on the average exchange ratio over the past year.

Alumina shareholders will own approximately 31.6 per cent of the combined group, with existing Alcoa shareholders to own the balance.

Alcoa has agreed to establish a foreign exempt listing on the ASX which would enable Alumina shareholders to trade Alcoa shares in the same way they would normally trade ASX-listed Alumina shares.

Alumina Limited owns 40 per cent of Alcoa World and Alumina Chemicals (AWAC), with ties to Alcoa dating back to 1961.

The Alumina board, including chief executive officer and managing director Mike Ferraro, has encouraged shareholders to vote in favour of the transaction.

“We believe the time is right to combine our two companies,” Alumina chair Peter Day said.

“The combined entity will have a larger and stronger balance sheet, and be better able to fund the current portfolio restructuring actions in AWAC, as well as realising potential growth options in the medium to longer term.

“Alumina shareholders will participate in a leading global pure play upstream aluminium company, with a low carbon smelting portfolio.”

The AWAC joint venture holds a global network of assets including bauxite mines and alumina refineries in Australia, Brazil, Spain, Saudi Arabia and Guinea.

AWAC also has a 55 per cent interest in the Portland aluminium smelter in Victoria, Australia.