After initially rising, Alcoa’s share price slipped back and was unchanged at $9.69 in in premarket trading about two hours ahead of the market open.
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Kleinfeld will lead the downstream manufacturing company as chairman and CEO, and serve as chairman for the upstream Alcoa for its initial phase.
“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”, Kleinfeld said in a statement.
REUTERS/Kevin LamarqueRolled aluminum at an Alcoa plant.The aluminum giant Alcoa is splitting itself into two public companies: Upstream Company and Value-Add Company.
Executives said as the company works out the details of the split it will allocate debt and pension liabilities “in a manner that is prudent for the two businesses to have the balance sheet” Alcoa is targeting.
The Alcoa name will remain with the metals company that does mining, refining and aluminum production at 64 plants worldwide.
New York-based Alcoa’s traditional smelting business has been hurt by a ballooning surplus of aluminum, which has caused prices to sink and deepened the industry’s worst crisis in years.
Still, efforts by the world’s third-largest producer of aluminum to address the diverging trends had given conflicting messages for investors, according to sources close to the company.
In a conference call with analysts Alcoa said that as of December 31 2014, its pension was underfunded by about $3.3 billion. Approximately 40 percent of the company’s pro-forma revenues for the 12 months through June 30, 2015 came from the aerospace market.
The downstream company will have about 43,000 workers, with sales of $14.5 billion and Ebitda of about $2.2 billion in the year through June 30.
The new company is being compared to Precision Castparts (NYSE:PCP), the company that Warren Buffett agreed to purchase stake in for $37.2 billion in August. The company will also be at the forefront of capturing demand for aluminum intensive vehicles through Alcoa’s recent rolling mill capacity expansions and the commercialization of breakthrough technologies such as the Micromill.
Management expects the action to be completed in the second half of 2016.
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Morgan Stanley and Greenhill & Co. are serving as financial advisors to Alcoa, and Wachtell, Lipton, Rosen & Katz is serving as legal counsel in connection with the separation.
