Alcoa board approves demerger, after Alumina peace deal

Alcoa’s board has approved the New York Stock Exchange-listed aluminium giant’s demerger into two public entities, scheduled to come into effect on November 1.

Spin-off Arconic will provide high-performance materials and engineered products to the aerospace and automotive industries, while Alcoa will focus on bauxite, alumina and aluminium products, the company said.

Alcoa’s current chairman and chief executive Klaus Kleinfeld will become the chairman and chief executive of Arconic. Alcoa’s new chairman will be current director Michael Morris, while group president of global primary products Roy Harvey will become Alcoa’s chief executive.

The company said it will make the separation through a distribution of 80.1 per cent of the common stock of the demerged Alcoa, while Arconic will keep 19.9 per cent of the common stock of the demerged Alcoa.

The plans follow a peace deal with Melbourne-based Alumina over the companies’ alumina joint venture AWAC, which resolved a looming court action that threatened to delay the demerger.

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Alcoa had planned to transfer AWAC into the new legal entity as part of the demerger. Alumina said this plan triggered first-right-of-refusal rights to buy Alcoa’s stake in the joint venture.

The parties’ revised agreement allows Alumina more opportunity to veto corporate activity within AWAC, as well as possibly providing larger cash flows.