US-based lightweight metals producer Alcoa will split into two distinct companies, after its board of directors approved a plan to launch two new Fortune 500 companies.
A “globally competitive Upstream Company” will comprise five of Alcoa’s business units – bauxite, alumina, aluminium, casting and energy – while an “innovation and technology-driven Value-Add Company” will incorporate Alcoa’s Global Rolled Products, Engineered Products and Solutions, and Transportation and Constructions Solutions business units, the company told the market on Monday.
The transaction is expected to be completed in the second half of 2016.
Both independent companies will attract an investor base best suited to their unique value proposition and operational and financial characteristics, the board of directors reasoned.
The move is similar in nature to Australian giant BHP Billiton’s recent spin-off move, into new venture South32. The company is looking to separate its more profitable and reliable business units from its more variable units.
Alcoa has closed unprofitable raw aluminium smelters in recent times, as the price for the commodity has dipped along with many major mining commodities.
Alcoa chairman and CEO Klaus Kleinfeld, who will lead the Value-Add business after the split, said the board had been working for some time to distinguish the two halves of the business.
“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,” he said.
“After steering the Company through the deep downturn of 2008, we immediately went to work reshaping the portfolio.
“We have repositioned the upstream business; we have an enviable bauxite position and are unrivalled in Alumina, we have optimized Aluminum, flexed our energy assets, and turned our casthouses into a commercial success story.
“The upstream business is now built to win throughout the cycle. Our multi-material value-add business is a leader in attractive growth markets.”
Kleinfeld concluded: “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.”