Ma’aden-Alba merger ‘a potential game changer’

Reuters/Zuhair Al-Traifi

• Likely shake-up of aluminium world
• Challenger for sixth largest firm
• Saudi-Bahrain deal awaits approval

The proposed merger between the Saudi Arabian mining company Ma’aden and Bahrain’s aluminium smelter Alba looks likely to shake up the global aluminium industry, with the new company challenging for sixth place in the world rankings.

“It’s almost a game-changing event, particularly in the GCC region,” says Andy Farida, a senior analyst at Fastmarkets, a commodity information service in the City of London.

“This will allow the companies to better implement technological advancements and kill two birds with one stone: increase their market share in low-carbon aluminium and enable their current operations to fit with the vision of Saudi 2030,” Farida says. 

In a flurry of share swap and issue agreements that took place back-to-back last week, Ma’aden moved to acquire a 20.6 percent stake in Alba from the Saudi Basic Industries Corp (Sabic), worth around $1 billion. 

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It also tentatively bought the US aluminium producer Alcoa out of a 15-year-old joint venture that owned the mining-and-refining operation Ma’aden Bauxite and Alumina Company and the smelter and casthouse Ma’aden Aluminium Company. 

Maaden then clinched a non-binding deal with the Bahraini company, which is the oldest aluminium smelter in the Middle East and one of the largest in the world outside of China.

Alba, which is listed on the Bahrain Bourse, is Bahrain’s largest company by revenue, and second largest by market capitalisation. In 2023, Alba’s revenue was $4.1 billion, just less than a tenth of Bahrain’s estimated GDP of $44.7 billion. 

The deal means that Ma’aden will add its two subsidiaries Maaden Bauxite and Alumina and Ma’aden Aluminium to the combined entity in exchange for new shares in, and likely ultimate control of, Alba.

Zaid Aljanabi, principal aluminium analyst at business intelligence company CRU, says this is a potentially significant development for the industry, as it comes after what was already strong sector growth in the region in recent years. 

“The GCC has become a major player in the global aluminium industry because of the large expansion we have seen during the first decades of the 21st century,” he says. 

Aluminium is a widely used metal, found in everything from cans to EV batteries. It is also extremely energy-intensive to make. Production of one tonne requires about 14,000 kilowatt-hours, which is equivalent to the power the average UK house consumes over five years, according to a widely cited estimate. 

As such, the GCC’s ample availability of energy sources and its location at the crossroads of global trade give it a competitive advantage in the industry, according to Aljanabi.

Ambitious investments in solar power by countries such as Saudi Arabia and the UAE in particular may even help reduce aluminium production’s environmental footprint by putting green energy into the resource mix, Aljanabi says.

Ma’aden, a name derived from the Arabic for Saudi Arabian Mining Company, is half-owned by the Riyadh government and half traded on the kingdom’s stock exchange, the Tadawul.

The merger with Alba – Aluminium Bahrain – is pending all required due diligence and regulatory approvals.

An analysis by Bahrain’s Sico Bank says the combined entity would have a capacity to produce some 2.4 million tonnes a year of primary aluminium, or the new, non-recycled version of the metal.

This is about the same as Emirates Global Aluminium (EGA), the largest industrial firm in the UAE outside the oil and gas sector.

“Healthy competition”

“There’s always regional rivalry, but I think it is a healthy competition for the companies,” Farida says. Especially if it contributes to more aluminium from the GCC being low-carbon and brings emission down, “then it’s good for the whole planet,” he adds.

EGA is currently the sixth largest primary aluminium producer in the world in a ranking otherwise dominated by Chinese players, Russia’s Rusal and the British-Australian Rio Tinto. India is another increasingly important producer.

Sico Bank analysts call this a great deal for Alba “on many counts”. Its report says: “For Ma’aden, this is the cheapest (below replacement cost) and quickest way to grow its aluminium business and reinforces its status as a national champion with global ambitions.” 

Sico’s report suggested that with Ma’aden likely to be a majority shareholder in the merged company, shareholders would potentially see the Bahraini company as a quasi-Saudi one, boosting its attractiveness and triggering a speculative valuation re-rating.

Ma’aden’s stock on the Tadawul has risen more than 10.5 percent over the past five days. 

Neetika Gupta, head of research at asset management company UCapital, says his company upgraded Maaden from a “hold” to an “accumulate” rating after the news broke of the merger.

He says: “Very low shareholder dilution in the string of recent moves as Ma’aden is leveraging its equity to buyout minority stakes in key businesses. In fact, it could be highly value-accretive for shareholders.”