By Dennise Williams, Staff ReporterKAISER ALUMINIUM & Chemical Corporation announced last week its intention to sell its 65 per cent stake in Aluminium Partners of Jamaica (Alpart) to Swiss-based Glencore International AG.
The deal is priced at between US$160 million and US$170 million, and its completion will see Kaiser taking a US$50 million pre-tax book loss.
"I am not at liberty to discuss the impending sale," said public relations manager of Alpart, Lance Neita. "The negotiations are at a delicate stage at this time."
Efforts to speak to officials at the Houston, Texas, United States head office of Kaiser proved unsuccessful.
COMPLICATION
One complication of the deal is the fact that the United States Bankruptcy Court for the district of Delaware must approve the sale. Additionally, there is an outstanding option held by Hydro Aluminum of Norway, the owner of the remaining 35 per cent of Alpart that could put a wrench in the deal.
According to media reports, Hydro will have 30 days following court approval of the sale to decide whether or not to purchase the 65 per cent from Kaiser. If Hydro does exercise their option, Kaiser will have to reimburse Glencore up to US$250,000 in expenses.
Nonetheless, some elements of the deal that will affect the final purchase price are:
1. Interest in Kaiser and certain of its subsidiary in Alpart.
2. Alumina sales contracts that are typically sourced from Kaiser's share of alumina production at Alpart.
3. Payment of outstanding Alpart loans.
4. The provision for Glencore to supply Kaiser with alumina of up to 200,000 metric tonnes in 2004 and up to 100,000 metric tonnes in 2005 at an agreed percentage of London Metal Exchange aluminium prices.
Angus Macmillan, a metals analyst, told London media that, "Glencore as a potential buyer stands to gain another Jamaican alumina refinery cheaply while alumina is at the high price of US$300 per tonne."
Currently Glencore holds a 93 per cent stake in West Indies Alumina Co. (Windalco) with the Government of Jamaica owning the remaining seven per cent. Should the deal between Kaiser and Glencore gain court approval on February 23, 2004, the date set for hearing the motion for sale, Glencore will control a substantial stake in the Jamaican bauxite and alumina industry.
Glencore would enjoy the benefits of Kaiser's expansion of Alpart, which now has the capacity to produce 1.65 million metric tonnes of bauxite. In 2003, Alpart's production was 1.4 million tonnes a year.
Additionally, Alpart comes with the exclusive right to bauxite reserves that have the annual production capacity of 3.5 million metric tonnes.
Glencore, through Windalco, already produces approximately 1.25 million tonnes per year.
In terms of the effect of this sale on the workers at Alpart, the company is silent.
In reports published in Houston last week, Jack A. Hockema, president and CEO of Kaiser, expressed the company's satisfaction with the impending deal with Glencore.
"In light of Glencore's extensive investments in the alumina industry, including its interests in Jamaica, and its strong financial profile, we believe this transaction will give Alpart employees and other constituents a sound opportunity for future investment and growth."
BANKRUPTCY PROTECTION
The genesis of this sale came from Kaiser's February 2002 bankruptcy protection filing. At the time the company stated that high debt, poor alumina pricing, a broad economic slowdown furthered by the September 11 attacks, growing medical and pension costs for retirees and asbestos litigation costs were the reasons for the move to protect itself from creditors.
In 2002, it was revealed that there was an estimated US$633 million worth of asbestos exposure faced by the company. In January of 2003, the company also revealed that its pension fund was short of US$15 million.
Locally, bauxite and alumina contributes approximately 9.3 per cent to the Gross Domestic Product (GDP). As of 2002, the figures below were available from the Statistical Institute of Jamaica (Statin), Planning Institute of Jamaica (PIOJ) and the Jamaica Bauxite Institute (JBI).
