** Shares of U.S. aluminum producer Alcoa AA.N drop more than 11% on Weds to lowest levels since Dec after deal with Australia's South32 for its aluminum portfolio

** South32 S32.AX shares rose 9.7% in Australian trading. It said it has agreed to sell most of its aluminium assets to Alcoa for an implied enterprise value of up to $5.6 bln

** South32 also said Alcoa will assume about $1.2 bln in cleanup and site-closure liabilities tied to the assets

** Jefferies analysts wrote in a note the deal "makes strategic and economic sense and is not a surprise to us but could be a temporary overhang on Alcoa's share price."

** "The synergy NPV of $900m may seem high as it is nearly 20% of the deal value, but there should be clear value creation from this combination due to asset adjacencies (bauxite mines in Australia) and other real operational benefits (consolidating Brazilian assets)," they said

** Nine analysts covering AA rate it a "strong buy" or "buy" while four rate "hold," per LSEG

** AA now down about 13% YTD