Alcoa said its upstream company, which will keep the Alcoa name, will include its bauxite-mining, alumina-refining and aluminum-production businesses.
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New York-based Alcoa’s traditional smelting business has been hurt by a ballooning surplus of aluminium, which has caused prices to sink and deepened the industry’s worst crisis in years.
Still, the company has bet on growth from higher-margin titanium and high-strength aluminum sales to the aerospace industry, citing a growing order book for airplane production and renewed global spending on automobiles. Last December, Alcoa unveiled a process it calls Micromill to produce high-strength aluminum alloy, targeting automakers who are seeking an alternative to heavier steel.
The transaction was expected to close in the second half of 2016.
Additionally, CEO Klaus Kleinfeld stated, “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”.
In a press release this morning, aluminum giant and legacy company Alcoa (NYSE:AA) announced it will be splitting itself into two public companies by the end of 2016. The division of the company does not need shareholder approval, sources familiar with the matter said.
Value-Add, the split-off company, would have had revenues of $14.5 billion in the same time period, with an EBITDA of $2.2 billion.
On completion of the split, Kleinfeld will continue to lead the new downstream company and will also serve as chairman of the upstream company “for the critical initial phase, ensuring a smooth and effective transition”. Revenues for the 12 months through June 30, 2015 totaled $13.2 billion, with $2.8 billion in EBITDA. Future profitable growth will be supported by a full pipeline of innovative products and solutions, and the pursuit of investment opportunities that provide a return above the cost of capital.
On Friday, the company’s Board declared dividends of $0.03 per share, payable on November 25, along with a $0.93 dividend for its cumulative preferred stock shareholders.
Earlier this month, Alcoa broadened a partnership with Ford Motor Co. through the use of a stronger form of aluminum for auto body parts. The price of the metal has fallen 16 percent this year as consumption in China slows while producers there try to export more metal.
Shares pre-market were up over 6%.
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The new, upstream Alcoa will employ about 17,000 people.
