Struggling Aluminum maker Alcoa Inc. said Monday that it would split into two publicly traded companies next year, joining the recent wave of companies looking to spur growth by breaking up.
For example, Value-Add will house businesses that cater to the automotive and aerospace industries, dealing in the newer, more durable and attractive metals such as titanium that have been replacing aluminum demand.
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. Airplane manufacturers have turned to lightweight titanium from aluminium and automakers to new, strong aluminium alloys instead of high-strength steel to improve performance and fuel efficiency.
Efforts by the world’s third-largest producer of aluminum to address these diverging trends resulted in conflicting messages for investors, according to sources close to the company.
Alcoa said its upstream company, which will keep the Alcoa name, will include its bauxite-mining, alumina-refining and…
“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”, said Klaus Kleinfeld, Alcoa chairman and chief executive, in a statement.
The company’s announcement didn’t specify locations for those upstream operations and their 17,000 employees, but Alcoa now has significant production capacity in the province of Quebec.
The new firm created by the split had revenue for the same period of $14.5 billion, with EBITDA of $2.2 billion, 43,000 workers and 157 facilities. The spinoff, which is yet to be named, will acquire these businesses, which include providing metal products for transportation, industrial gas turbines and construction. The company’s strengths can be seen in multiple areas, such as its revenue growth, increase in net income and reasonable valuation levels. The stock has fallen 42 percent this year alone.
In mid-September, Alcoa announced a deal with Ford Motor Co.to provide multiple components for the 2016 model F-150 pickup, the best-selling United States vehicle since 1982, using Micromill. Approximately 40 percent of the company’s pro-forma revenues for the 12 months through June 30, 2015 came from the aerospace market.
ALSO READ: 9 Well-Known Stocks With Solid Dividend Yields Above 5%.