Alcoa (AA) to Separate into Two Publicly Traded Companies

Shares of Alcoa Inc. were trading up +0.63 or +6.95 percent to $9.70 per share in Monday’s premarket after the company announced early this morning that it would be splitting into two separate publicly traded companies. Alcoa stock closed at $9.07, down -0.11 or -1.20 percent in Friday’s regular trading session.

Dually headquartered in Pittsburgh, Pennsylvania and New York City, Alcoa Inc. was founded as the Aluminum Company of America in 1888.
The company has since become the world’s third largest producer of aluminum. Alcoa is a global leader in lightweight metals technology, manufacturing and engineering, enhancing transportation from passenger and commercial vehicles to space travel. The company employs approximately 60,000 people in 30 countries and is one of the world’s largest manufacturers of products containing aluminum, nickel and titanium. Alcoa also is a leading producer of bauxite aluminum, as well as primary and fabricated aluminum and alumina.

Alcoa announced early this morning that its board of directors had unanimously approved the separation of the company into two entities: an Upstream Company, which will concentrate on bauxite mining, aluminum production and alumina refining; and a Value-Add Company, which will focus on providing high performance multi material products and solutions for the aerospace and transportation industries, as well as in construction and industrial gas turbine manufacturing.

Klaus Kleinfeld, Chairman and Chief Executive Officer of Alcoa stated in the company’s press release that, “In the last few years, we have successfully transformed Alcoa to create two strong value engines that are now ready to pursue their own distinctive strategic directions. After steering the Company through the deep downturn of 2008, we immediately went to work reshaping the portfolio. We have re positioned the upstream business; we have an enviable bauxite position and are unrivaled in Alumina, we have optimized Aluminum, flexed our energy assets, and turned our casthouses into a commercial success story.”

He concluded saying, “Inventing and reinventing has defined our Company throughout its 126-year history. With the unanimous support of Alcoa’s Board we now take the next step; launching two leading-edge companies, each with distinct and compelling opportunities, and each ready to seize the future.”

The Upstream Company will include Alcoa’s mining, refining and production plants, which number 64 facilities worldwide. The Upstream Company will employ approximately 17,000 people and had revenues of $13.2 billion with $2.8 billion in EBITDA for the twelve months through June 30th, 2015.

The Value-Add Company will provide multi material products and solutions through 157 operating locations throughout the world, employing roughly 43,000 people. The segment which will become the Value-Add Company had pro-forma revenues of $14.5 billion with $2.2 billion in pro-forma EBITDA for the 12 months through June 30th, 2015.

After the transaction is completed — which is expected by the second half of 2016 — Klaus Kleinfeld will become the Chairman and Chief Executive Officer of the Value-Add Company and also serve as Chairman of the Upstream Company during the initial phase of the transaction to ensure a smooth transition. The two separate companies will have their own independent board of directors which will include members of Alcoa’s board.

The deal has been well received by the market, with Alcoa stock up almost seven percent in this morning’s premarket. Once the deal is completed, original Alcoa shareholders will have two independent companies' stocks, which could appreciate significantly.

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Published on Sep 28, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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