Alcoa¡¯s Value-add Company to focus on high-performance multi-material products

Alcoa, the lightweight metal leader, announced that its Board of Directors has unanimously approved a plan to separate into two independent, publicly-traded companies. The separation will launch two industry-leading, Fortune 500 companies- the Upstream Company and the innovation and technology-driven Value-Add Company. The Value-add Company will include Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions. 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. Both entities will be capitalized prudently, with the Value-Add Company targeting an investment grade rating and the Upstream Company a strong non-investment grade rating. The Value-Add Company will be named prior to closing.

Management Structure and Governance

Upon completion of the transaction, Klaus Kleinfeld will lead the Value-Add Company as Chairman. Full management teams and boards for both companies will be named in the months leading up to the launch of the two companies in the second half of 2016.

The Value-Add Company

After the separation, the Value-Add Company will be a premier provider of high-performance multi-material products and solutions with 157 globally diverse operating locations and approximately 43,000 employees. Pro-forma revenues for the Value-Add Company for the 12 months through June 30, 2015 totalled $14.5 billion, with $2.2 billion in pro-forma EBITDA.

The Value-Add Company will be positioned for profitable growth by increasing share in fast growing end markets and leveraging significant customer synergies across the midstream and downstream portfolios. The company will be a differentiated supplier to the high-growth aerospace industry with leading positions on every major aircraft and jet engine platform, underpinned by market leadership in jet engine and industrial gas turbine airfoils, and aerospace fasteners. Approximately 40 percent of the company’s pro-forma revenues for the 12 months through June 30, 2015 came from the aerospace market.

The company will also be at the forefront of capturing demand for aluminium intensive vehicles through Alcoa’s recent rolling mill capacity expansions and the commercialization of breakthrough technologies such as the Micromill. Automotive revenues are expected to increase 2.4 times from 2014 to $1.8 billion in 2018. Additionally, the Value-Add Company will be an unparalleled leader in aluminium commercial truck wheels and will hold the number one market position in North American architectural systems. 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.

Conditions and Timing to Close

Alcoa is currently targeting to complete the separation in the second half of 2016. The transaction is subject to certain conditions, including, among others, obtaining final approval by Alcoa’s Board of Directors and receipt of a favourable opinion of legal counsel with respect to the tax-free nature of the transaction for U.S. federal income tax purposes.

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