Alcoa Corporation today announced an agreement to sell its
rolling mill business, held by Alcoa Warrick LLC, to Kaiser
Aluminum Corporation for total consideration of approximately $670
million, which includes $587 million in cash and the assumption of
$83 million in other postretirement employee benefit (OPEB)
liabilities.
The sale is expected to close by the end of the first quarter of
2021, pending regulatory approval and customary closing
conditions.
The rolling mill is located at Warrick Operations, an integrated
aluminum manufacturing site near Evansville, Indiana. Alcoa will
retain ownership of the site’s 269,000 metric ton per year aluminum
smelter and its electric generating units. Alcoa will also enter
into a ground lease agreement with Kaiser for property that Alcoa
will continue to own at the Warrick site.
Today’s announcement is part of Alcoa’s strategy to generate
between $500 million and $1 billion in cash through the sale of
non-core assets and will put total cash proceeds in the target
range. Earlier this year, Alcoa announced the sale of its former
waste treatment business in Gum Springs, Arkansas, and received
$200 million in cash with an additional $50 million that will be
paid if certain post-closing conditions are satisfied.
“The sale will achieve a key target in our strategy to focus on
core markets while generating additional cash,” said Alcoa
President and CEO Roy Harvey. “We look forward to having Kaiser
Aluminum as a valued customer at Warrick Operations, and we thank
all of the employees who have contributed significantly to the
site’s 60-year history of manufacturing excellence.”
As part of the transaction, Alcoa will enter into a market-based
metal supply agreement with Kaiser Aluminum at closing. Alcoa will
continue to operate the smelter and the power plant, which together
employ approximately 660 people.
Approximately 1,170 employees at the rolling operations, which
includes the casthouse, hot mill, cold mills, and coating and
slitting lines, will become employees of Kaiser Aluminum once the
transaction is complete. The rolling mill produces approximately
310,000 metric tons of flat rolled aluminum annually for use in
packaging, including food containers, aluminum cans, and
bottles.
After closing, Alcoa expects annual approximate decreases in
sales of $800 million, net income (pre- and after-tax) of $45
million to $55 million, and Adjusted EBITDA of $90 million to $100
million, based on last 12-month pricing through September 2020.
Alcoa expects to spend approximately $100 million for site
separation and transaction costs, with approximately half being
spent in 2021 and the remainder in 2022 and 2023.
Credit Suisse Securities (USA) LLC acted as exclusive financial
advisor to Alcoa for this transaction and Jones Day served as legal
counsel.
William Oplinger, Alcoa’s EVP and CFO, will discuss this
divestiture at the previously announced virtual investor conference
beginning at 10:30 a.m. EST on Tuesday, December 1, 2020, which
will be available through a live audio webcast on the “Investors”
section of Alcoa’s website, www.alcoa.com. As previously announced,
a slide presentation, to be used in connection with the conference
and investor meetings, will be also available on the “Investors”
section of the Company’s website at www.alcoa.com beginning at
approximately 8:00 a.m. EST on Tuesday, December 1, 2020.
About Alcoa
Alcoa (NYSE: AA) is a global industry leader in bauxite,
alumina, and aluminum products, and is built on a foundation of
strong values and operating excellence dating back more than 130
years to the world-changing discovery that made aluminum an
affordable and vital part of modern life. Since developing the
aluminum industry, and throughout our history, our talented Alcoans
have followed on with breakthrough innovations and best practices
that have led to efficiency, safety, sustainability, and stronger
communities wherever we operate. Visit us online on www.alcoa.com,
follow @Alcoa on Twitter, and on Facebook at
www.facebook.com/Alcoa.
Dissemination of Company Information
Alcoa Corporation intends to make future announcements regarding
company developments and financial performance through its website,
www.alcoa.com, as well as through press releases, filings with the
Securities and Exchange Commission, conference calls, and
webcasts.
Forward-Looking Statements
This news release contains statements that relate to future
events and expectations relating to the sale of Alcoa Corporation’s
rolling mill business, including but not limited to Alcoa
Corporation’s expectations regarding the completion and timing of
the sale, types and estimates of associated costs, and financial
impact of the sale, and as such constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include those
containing such words as “anticipates,” “believes,” “could,”
“estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,”
“outlook,” “plans,” “projects,” “seeks,” “sees,” “should,”
“targets,” “will,” “would,” or other words of similar meaning. All
statements by Alcoa Corporation that reflect expectations,
assumptions or projections about the future, other than statements
of historical fact, are forward-looking statements. Forward-looking
statements are not guarantees of future performance and are subject
to known and unknown risks, uncertainties, and changes in
circumstances that are difficult to predict. Although Alcoa
Corporation believes that the expectations reflected in any
forward-looking statements are based on reasonable assumptions, it
can give no assurance that these expectations will be attained and
it is possible that actual results may differ materially from those
indicated by these forward-looking statements due to a variety of
risks and uncertainties. Additional information concerning factors
that could cause actual results to differ materially from those
projected in the forward-looking statements is contained in Alcoa
Corporation’s filings with the Securities and Exchange Commission.
Alcoa Corporation disclaims any obligation to update publicly any
forward-looking statements, whether in response to new information,
future events or otherwise, except as required by applicable
law.
Non-GAAP Financial Measures
The Adjusted EBITDA measure included in this release is derived
from Alcoa Corporation’s consolidated financial information but is
not presented in Alcoa Corporation’s financial statements prepared
in accordance with accounting principles generally accepted in the
United States of America (GAAP), and is considered a “non-GAAP
financial measure” under SEC regulations. Alcoa Corporation
believes that this measure is meaningful to investors because
Adjusted EBITDA provides additional information with respect to
Alcoa Corporation’s operating performance and Alcoa Corporation’s
ability to meet its financial obligations. The presentation of
non-GAAP financial measures is not intended to be a substitute for,
and should not be considered in isolation from, the financial
measures reported in accordance with GAAP. A reconciliation to the
most directly comparable GAAP financial measure is set forth
below.
Reconciliation of Adjusted EBITDA to
Net Income (unaudited)
(in millions)
Net income attributable to Alcoa
Corporation
$45 - $55
Provision for depreciation, depletion, and
amortization
25
Other expenses, net
20
Adjusted EBITDA
$90 - $100
Alcoa’s Corporation’s definition of Adjusted EBITDA (Earnings
before interest, taxes, depreciation, and amortization) is net
margin plus an add-back for depreciation, depletion, and
amortization. Net margin is equivalent to Sales minus the following
items: Cost of goods sold; Selling, general administrative, and
other expenses; Research and development expenses; and Provision
for depreciation, depletion, and amortization. Adjusted EBITDA is a
non-GAAP financial measure. The Adjusted EBITDA presented may not
be comparable to similarly titled measures of other companies.
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version on businesswire.com: https://www.businesswire.com/news/home/20201130005927/en/
Investors James Dwyer 412-992-5450 James.Dwyer@alcoa.com
Media Jim Beck 412-315-2909 Jim.Beck@alcoa.com
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