Aluminum Giant Alcoa to Split Into Two Companies

Alcoa Inc., Pittsburgh, Pa., announced it would split into two publicly traded companies, splitting the firm’s casting and fabrication units from operations in raw aluminum. The raw materials business—including bauxite mining, alumina refining and aluminum production—will retain the Alcoa name. The second company will be the company’s “value-added business,” including its metalcasting operations.

“We’ve worked very hard on changing the setup of both of these businesses,” said Klaus Kleinfeld, CEO, Alcoa. “All of this has led to a structure of both firms to really be competitive and be able to run on their own.”

Mr. Kleinfeld will become CEO of the value-add company and act as chairman for both companies. According to the Wall Street Journal, the value-added company would have had $14.5 billion in revenue in the year ended June 30, while the raw metals division would have had revenue of $13.2 billion.

Alcoa’s aerospace and automotive divisions have been driving profit recently as demand for aluminum components has increased. Alcoa has benefited from Ford Motor Co. and other major OEMs buying aluminum parts as lightweight alternatives to comply with new fuel-efficiency regulations.

The deal, which is expected to be tax-free for shareholders, is expected to close in the second half of 2016. Alcoa shareholders will own all outstanding shares of both companies.