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New Details On Alcoa's Plans To Split Into 2 Companies

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New Details On Alcoa's Plans To Split Into 2 Companies

Referring to the regulatory filings of Alcoa Inc (NYSE: AA), Reuters reported the company will spin off its traditional upstream smelting business in the second half of 2016, and name it Alcoa Corp.

Up to 19.9 percent of this newly formed company will be owned by its value-added business serving the aerospace and automotive industries and will be named Arconic Inc. The split is announced at a time when aluminum prices remain around record lows.

In addition, Alcoa has been lowering its refining and smelting capacity and has focused on more advanced aerospace and automotive products. It announced deals to provide a light but tough aluminum alloy for Ford Motor Company (NYSE: F)'s F-150 model and aerospace contracts including titanium seat track assemblies for Boeing Co (NYSE: BA)'s 737 MAX, 777X and 787 Dreamliner.

Related Link: Alcoa Offers Further Details On Its Proposed Business Spin

Alcoa's traditional upstream business and value-added business had pro forma revenues of $11.2 billion and $12.5 billion, respectively, as reported by the company and cited by Reuters.

The new upstream business is expected to have around $236 million in outstanding long-term debt following the deal. The new company will raise approximately $1 billion in new debt and provide for up to $1.5 billion in funding through a revolving credit facility.

The major part of the Alcoa's outstanding $9 billion debt will remain with Arconic, which will be an investment-grade entity, while the new Alcoa will be a "strong non-investment grade" firm, as stated by the company.

At time of writing, Alcoa was down 1.98 percent on the day, trading at $9.15.

Posted-In: 787 Dreamliner Alcoa Corp.News Commodities Stock Split Markets Media Trading Ideas

 

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