The Alcoa stock price jumped 3.85% to $9.46 Monday morning after the aluminum giant announced it will split into two separately traded public companies.
Alcoa Inc. (NYSE: AA) will be comprised of five strong business units that presently make up its global primary products. Those products are bauxite, alumina refining, aluminum, casting, and energy. This company will keep the legacy Alcoa name.
After the separation, Alcoa Inc. will be a cost-competitive leader in its space. The company's footprint will include 64 global facilities with roughly 17,000 employees. Revenue for the 12 months ending in June 2015 totaled $13.2 billion.
The innovation- and technology-driven, value-added company will include global rolled products, engineered products and solutions, and transportation and construction solutions. This company is yet to be named and will be led by Chief Executive Officer Klaus Kleinfield. He will also be the chair of Alcoa Inc.
The value-added company will be a premiere provider of high-performance, multi-material products and solutions with 157 worldwide operation locations and some 43,000 employees. Pro-forma revenue for the 12 months through June 2015 was $14.5 billion.
Here's what the split means for shareholders and for the Alcoa stock price...
What the Split Means for the Alcoa Stock Price
This tax-free separation is expected to be completed in the second half of 2016. Alcoa shareholders will own all outstanding shares of both companies.
Kleinfeld said the split comes as both entities have grown into competitive sizes that allow each to solidly stand alone. He told CNBC that the separation provides each company with more flexibility to negotiate deals and focus on their own strengths.
"We are interested in creating value for our customers, for our shareholders, for our employees, and at this point this is the option we see that creates the biggest value," Kleinfeld told Reuters.
The split comes at a time when Alcoa is slashing its total smelting capacity...
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
Amid a flood of raw aluminum and other industrial metals from China, which has kept the commodity's price low, Alcoa has slashed its total smelting capacity by 33% since 2007.
The value-added company is expected to reap a sizable portion of its revenue from the aerospace industry. The company has strengths in jet engine and industrial gas turbine airfoils and aerospace fasteners.
The company is also poised to benefit from an increase in automotive revenue thanks to escalating demand for aluminum-intensive vehicles, which are lighter and comply with new fuel efficient standards.
Year to date, the Alcoa shares are down 41.1%.
Stay informed on what's going on in the markets by following us on Twitter @moneymorning.
Protect Yourself from a Total Market Collapse: According to CIA Asymmetric Threat Advisor Jim Rickards, there are five "flashpoints" that signal the death of the U.S. dollar and a complete economic collapse in the United States. Here's how you can protect yourself, and your money, before it's too late...