Alcoa Ends Legal Fight With Australian Partner Alumina

Alcoa Inc. and joint-venture partner Alumina Ltd. have settled their dispute, ending competing litigation and removing a potential hurdle to Alcoa's plans to split into two new companies later this year.

New York-based Alcoa and Melbourne, Australia-based Alumina have been in business together since the 1960s, with Alcoa owning 60% of Alcoa World Alumina and Chemicals, or AWAC, and Alumina holding the rest. AWAC is the world's biggest alumina producer and the largest bauxite miner.

Alcoa last year announced plans to change its name to Arconic and focus on engineering parts for aerospace and automotive businesses, and to split off a new company, Alcoa Corp., which will house the company's traditional mining, smelting and refining divisions. The move is largely in response to declining aluminum prices and stiffer competition from lower-cost producers, led by China.

Alumina grew concerned over how Alcoa's plans to split would affect their joint venture. Alumina was worried, among other concerns, about potentially having to bear a hefty share of the spinoff Alcoa's liabilities once the company goes through its transformation.

There has been a diverging performance in recent times between Alcoa's ailing traditional metals business, which has closed plants and reported falling revenues, and its more profitable engineered-products business that will form the core of Arconic, which will make everything from lightning-resistant fasteners for airplanes to truck wheels.

The partners held a series of meetings that resulted in a lawsuit brought by Alcoa against its Australian partner. Alumina in June filed a counterclaim that aimed to block Alcoa's planned split without its consent.

Thursday, the companies said in a joint news release they had revised their joint-venture agreement to both their satisfaction and that they had in turn decided to end their litigation.

"We are strengthening our partnership agreement and more closely aligning the partners' interests," said Roy Harvey, president of Alcoa's global primary products business and future chief executive of Alcoa Corp.

That includes revisions to how the joint venture distributes dividends to the partners and plans to raise more debt for new projects. It also opens the door for a new partner to enter the joint venture, Mr. Harvey said.

"We believe that the JV is stronger and that Alumina is now also much stronger," Alumina CEO Peter Wasow told reporters on a call. He said the deal gives "the companies greater control over their investments and future strategic options."

Alcoa previously said its legal clash with Alumina didn't put its plans to split in jeopardy. The case was previously due to go to court later this month, and Alumina had said it would seek to prevent Alcoa from moving ahead with the split without its permission.

On Thursday, Alcoa said its plans for the breakup remain on track for completion in the second half of 2016.