MELBOURNE (Reuters) - Alcoa Inc AA.N and Alumina Ltd AWC.AX have settled a dispute and agreed to reshape their joint venture, removing an obstacle to Alcoa's plan to split into two companies and making its Australian partner a more attractive takeover target.

An Alcoa aluminum plant is seen in Alcoa, Tennessee, United States April 8, 2014. REUTERS/Wade Payne/File Photo

The two companies agreed to end a court fight that had threatened to delay Alcoa’s plan to spin off its plane and car parts business, which is now set to go ahead by the end of this year.

“Alcoa looks forward to completing our separation, launching two strong companies later this year, and to working closely with Alumina to realize the full potential of the AWAC partnership,” Alcoa’s president of global primary products and future Alcoa Corp boss Roy Harvey said in a statement.

Alumina raised concerns last May that the spin-off plan would leave their Alumina and World Chemicals (AWAC) joint venture weakened. Alcoa fought back by going to court to seek a declaration that Alumina had no right to block the demerger.

The agreement on Friday gives the partners more flexibility to seek alliances outside the joint venture and gives Alumina, 40 percent owner of AWAC, more of a say than before in decisions on strategy, investments and operations.

Most importantly, it removes a poison pill in the 50-year-old AWAC joint venture which had made it nearly impossible for anyone other than Alcoa to make a bid for Alumina.

“What this may do is it may make Alumina that much more attractive for an industrial acquirer of the company,” said Simon Mawhinney, Chief Investment Officer of fund manager Allan Gray, Alumina’s third largest shareholder.

Alumina’s shares rose as much as 8.5 percent, valuing the company at A$4 billion ($3 billion).

The poison pill had required any industry bidder for Alumina or Alcoa to vend its own bauxite and alumina assets into the joint venture, a factor that had deterred the likes of Rio Tinto RIO.AXRIO.L bidding for Alumina's predecessor, Western Mining, nearly two decades ago.

The agreement also clears the way for Alumina’s share of bauxite and alumina to be taken up by an industrial partner if ownership of Alumina were to change hands.

“This is a series of changes to a longstanding joint venture which will not only enhance our ability to make money in the joint venture but also enhances our autonomy as a company,” Alumina Chief Executive Peter Wasow told reporters on a conference call.

He said no suitor was circling the company, which is 17.9 percent owned by China's CITIC Resources Holdings 1205.HK.

($1 = 1.3254 Australian dollars)