Australia's Alumina Limited on Monday announced a A$250 million ($195 million) off-market buyback tender for ordinary shares.

Alumina's directors considered a number of capital management initiatives to improve the company's capital structure, and concluded that an off-market buyback would be the most effective way to deliver additional benefits to shareholders. The directors also believe that shareholders will benefit from improving the company's debt and equity mix by a prudent level of debt, bringing its capital structure more in line with that of other Australian public companies.

The buyback will involve a tender process, under which eligible shareholders will be invited to offer to sell their shares to Alumina at discounts from 8% to 14% to the market price and/or as a final price tender. Alumina will determine the final buyback price based on the largest discountin the tender range that enables the repurchase of its targeted amount of capital.

Alumina's CEO John Marlay said: "An off-market buyback rather than an on-market transaction, will enable us to buy back shares at a significant discount."

Alumina said the off-market buyback, together with the 20% increase in the final dividend announced in February, are possible because of the company's strong earnings and cash flow, continuing positive outlook for the alumina and aluminium markets and strong franking account balance, the outlook of which is more secure due to the funding agreement signed with Alcoa in 2006. The company added that it is continuing to invest significantly in the growth of Alcoa World Alumina & Chemicals' alumina refining capacity.

The Alumina board believes that the proposed off-market buyback will not affect the capacity of the company, subject to business conditions, to maintain annual dividends of at least A$0.24 cents fully franked.

The Australian Taxation Office has accepted that the buyback price will comprise a capital component of A$0.36/share, with the remainder deemed a fully franked dividend for Australian taxation purposes.

Alumina is listed on the ASX and the NYSE. The company's strategy is to invest world-wide in bauxite mining, alumina refining and selected aluminium smelting operations through its 40% ownership of Alcoa World Alumina & Chemicals (AWAC), the world's largest alumina business. Alumina's partner, Alcoa, owns the remaining 60% of AWAC and is the manager.