Alcoa Inc (NYSE:AA) has spawned two spin-off entities that will each independently trade on the NYSE.
Arconic Inc will be the vehicle for the business that addresses the aerospace and automotive businesses, the so-called high-end manufacturing part of the business. Alcoa Corp will house the erstwhile commodity based businesses, namely bauxite, alumina and aluminum products.
Both units commenced trading yesterday under the tickers ARNC and AA, respectively.
Commodities the focus of Alcoa Corporation (NYSE:AA)
Alcoa’s portfolio will comprise the Bauxite, Alumina, Aluminum, Cast Products, Rolled Products and Energy businesses spanning 25 manufacturing units globally.
The bauxite business is the world’s largest, producing 45.3 million bone dry metric tons in 2015. Alcoa is also the world’s largest alumina producer, operating nine refineries on five continents.
“We are launching Alcoa Corporation as a world leader in the aluminum industry with distinct competitive advantages across the value chain,” said Roy Harvey, Chief Executive Officer of Alcoa in a statement. “Our bauxite and alumina portfolios enjoy strong first quartile cost positions and our aluminum portfolio has a highly competitive second quartile position.”
Investors wary of the commodity-heavy exposure of the new company may take heart from the company’s projection that global aluminum demand will grow 5% in 2016, and is expected to double between 2010 and 2020. “Alcoa Corporation is well-positioned to meet this robust demand,” the company said.
Alcoa Corporation (NYSE:AA) share structure
The spin-off was accomplished through the distribution of 1 share of Alcoa Corp for every three shares held in the erstwhile Alcoa Inc. Shareholders will retain their shares of Alcoa Inc, which will become Arconic Inc shares.
Alcoa Corporation (NYSE:AA) rose 7.28% to close at $23 on Tuesday, while Arconic Inc (NYSE:ARNC) slumped 12.3% to 18.92.
Arconic Inc (NYSE:ARNC) will focus on “multi-materials innovation, precision engineering and advanced manufacturing” in sectors such as aerospace and automotive, specialty and industrial products and construction.