Business Context and Reporting Period
This Form 8-K Current Report was filed by Century Aluminum Company on April 29, 2013, regarding events occurring on April 28 and April 29, 2013. The filing primarily announces a material definitive agreement to acquire an aluminum smelter and a tentative power supply agreement for an existing facility.
Key Financial Metrics and Transaction Details
- Acquisition Price: $61 million in cash for the Sebree aluminum smelter assets (net of a $4 million reduction for assumed retiree medical obligations).
- Financing: The Company expects to fund the acquisition using available cash on hand and borrowings under its revolving credit facility.
- Liabilities Assumed: Century Echo will assume certain specified liabilities; however, the seller (APPC) retains all historical environmental liabilities and has agreed to fully fund the assumed pension plan at closing.
- Guarantees: Rio Tinto Alcan Inc. (RTA) has guaranteed the obligations of the seller (APPC). Century Aluminum Company has issued a guaranty for the obligations of its subsidiary, Century Echo LLC.
Material Changes and Other Events
The filing reports two significant developments:
- Asset Acquisition: Entry into an agreement to acquire the Sebree smelter in Robards, Kentucky, from Alcan Primary Products Corporation (a subsidiary of Rio Tinto Alcan).
- Power Supply Agreement: A tentative agreement was reached with Kenergy Corporation and Big Rivers Electric Corporation to provide market-priced power to the Company's Hawesville, Kentucky smelter.
Outlook, Risks, and Contingencies
Consummation of the Sebree smelter acquisition is expected in June 2013 but is subject to several material conditions:
- Obtaining consent from third parties for contract assignments, including electricity suppliers and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union.
- Successfully negotiating an alumina supply agreement for the Facility.
- Satisfaction of customary closing conditions.
The filing notes that representations and warranties in the agreement are not categorical statements of fact and may not reflect the actual state of affairs as of the filing date.
Investor Verification Checklist
- Verify the final closing date of the Sebree smelter acquisition, currently expected in June 2013.
- Confirm the execution of the required alumina supply agreement for the Sebree Facility.
- Monitor the status of third-party consents, specifically from electricity suppliers and the labor union.
- Review the final terms of the power supply framework for the Hawesville smelter to confirm pricing and duration.
- Assess the impact of the $61 million cash outflow and potential credit facility drawdown on the Company's liquidity.