Alcoa (NYSE:AA) | Company Acquisitions & Divestures

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Acquisitions



Significant acquisitions made by Alcoa in the years 2009 to 2014 are discussed in the following.



TITAL


In March 2015, Alcoa completed the acquisition of TITAL, an aerospace structural castings company, for $204 million (€188 million) in cash TITAL, a privately held company with approximately 650 employees based in Germany, produces aluminum and titanium investment casting products for the aerospace and defense end markets. The purpose of this acquisition is to capture increasing demand for advanced jet engine components made of titanium, establish titanium-casting capabilities in Europe, and expand existing aluminum casting capacity. The assets and liabilities of this business are included within Alcoa's Engineered Products and Solutions segment.



RTI International Metals, Inc.


In March 2015, Alcoa signed a definitive agreement to acquire RTI International Metals, Inc. (RTI), a publicly traded U.S. company. RTI is a global supplier of titanium and specialty metal products and services for the commercial aerospace, defense, energy, and medical device end markets. The purpose of this acquisition is to expand Alcoa's range of titanium offerings and add advanced technologies and materials, primarily related to the aerospace end market. In 2014, RTI generated net sales of $794 million and had approximately 2,600 employees. On July 23, 2015, after satisfying all customary closing conditions and receiving the required regulatory and RTI shareholder approvals, Alcoa completed the acquisition of RTI. Alcoa purchased all outstanding shares of RTI common stock in a stock-for-stock transaction valued at $870 million (based on the $9.96 per share July 23, 2015 closing price of Alcoa's common stock). Each issued and outstanding share of RTI common stock prior to the completion of the transaction was converted into the right to receive 2.8315 shares of Alcoa common stock. In total, Alcoa issued 87,397,414 shares of its common stock to consummate this transaction. In addition to the transaction price, Alcoa also paid $25 million in professional fees and costs related to this acquisition. The operating results and assets and liabilities of RTI are included within Alcoa's Engineered Products and Solutions segment since the date of acquisition.



Firth Rixson


In June 2014, Alcoa signed a purchase agreement to acquire an aerospace jet engine components company, Firth Rixson, from Oak Hill Capital Partners for $2.85 billion. The purchase price was composed of $2,350 million in cash and $500 million of Alcoa common stock. The common stock component was equivalent to 36,523,010 shares at a per share price of $13.69, as determined in the agreement. Firth Rixson manufactures rings, forgings, and metal products for the aerospace end market, as well as other markets requiring highly engineered material applications. This business has 13 operating facilities in the United States, United Kingdom, Europe, and Asia employing approximately 2,400 people combined. The purpose of this acquisition is to strengthen Alcoa's aerospace business and position the Company to capture additional aerospace growth with a broader range of high-growth, value-add jet engine components. The operating results and assets and liabilities of Firth Rixson are included within the Engineered Products and Solutions segment since the date of acquisition. On November 19, 2014, after satisfying all customary closing conditions and receiving the required regulatory approvals, Alcoa completed the acquisition of Firth Rixson for $2,995 million. The purchase price was composed of $2,385 million in cash (net of cash acquired) and $610 million of Alcoa common stock. The cash portion of the transaction price increased by $35 million due to working capital and other adjustments based on the provisions of the purchase agreement. The common stock portion of the transaction price was based on the closing market price ($16.69 per share) of Alcoa's common stock on the acquisition date. This transaction is subject to certain post-closing adjustments as defined in the purchase agreement. In addition to the transaction price, Alcoa also paid $42 million in professional fees and costs related to this acquisition.



Aluminum Brazing Sheet Venture


In August 2014, Alcoa completed the acquisition of the 30% outstanding noncontrolling interest in the aluminum brazing sheet venture in Kunshan City, China from Shanxi Yuncheng Engraving Group for $28 million.



Aerospace Fastener Business of TransDigm Group, Inc.


On March 9, 2011, Alcoa completed an acquisition of the aerospace fastener business of TransDigm Group Inc. for $240 million (cash acquired and post-closing adjustments resulted in a net purchase price of $239 million). This business is a leading global designer, producer, and supplier of highly engineered aircraft components, with three locations (one in the state of California and two in the United Kingdom) that employ a combined 400 people. Specifically, this business provides a wide variety of high-strength, high temperature nickel alloy specialty engine fasteners, airframe bolts, and slotted entry bearings. In 2010, this business generated sales of $61 million. The assets and liabilities of this business were included in the Engineered Products and Solutions segment as of March 31, 2011; this business' results of operations were included in this segment beginning March 9, 2011. This acquisition is part of a strategic plan to accelerate the growth of Alcoa's fastener business, while adding efficiencies, broadening the existing technology base, and expanding product offerings to better serve customers and increase shareholder value.



Commercial Building and Construction Business of Traco


In July 2010, Alcoa completed an acquisition of the commercial building and construction business of a privately-held company, Traco, for $77 million. This business, located in Cranberry, Pennsylvania, employing 650 people, is a premier manufacturer of windows and doors for the commercial building and construction market and generated sales of approximately $100 million in 2009. The assets and liabilities of this business are included in the Engineered Products and Solutions segment.



Elkem Aluminium ANS Joint Venture


In March 2009, Alcoa completed a non-cash exchange of its 45.45% stake in the Sapa AB joint venture for Orkla ASA's (Orkla) 50% stake in the Elkem Aluminium ANS joint venture (Elkem). As a result of this transaction, Elkem is now owned 100% by Alcoa and Sapa AB is now owned 100% by Orkla. Prior to the completion of the exchange transaction, Alcoa accounted for its investments in Sapa AB and Elkem on the equity method and the carrying values were $475 million and $435 million, respectively, at December 31, 2008. Elkem includes aluminum smelters in Lista and Mosjøen, Norway with a combined output of 282 kmt and the anode plant in Mosjøen in which Alcoa already held an 82% stake. These three facilities employed approximately 700 workers combined. The addition of the two smelters and anode plant (supports Norway and Iceland operations) strengthens Alcoa's leadership position within the aluminum industry. The assets and liabilities of Elkem were included in the Primary Metals segment beginning March 31, 2009 (the final amounts recorded were based on the completion of a valuation study– see below) and Elkem's results of operations were reflected in this segment starting on April 1, 2009 (prior to this transaction, Alcoa's existing 50% stake in Elkem was reflected as equity income in this segment). The exchange transaction resulted in the recognition of a $188 million gain ($133 million after-tax), comprised of a $156 million adjustment to the carrying value of Alcoa's existing 50% interest in Elkem in accordance with fair value accounting and a $32 million adjustment for the finalization of the estimated fair value of the Sapa AB joint venture.



Fasteners Business in Morocco


In June 2009, Alcoa completed an acquisition of a fasteners business located in Morocco for $3 million. This transaction did not have a material impact on Alcoa's financials.



BHP Billiton Subsidiary


In July 2009, Alcoa World Alumina LLC (AWA LLC), a majority-owned subsidiary of Alcoa and part of Alcoa World Alumina and Chemicals, acquired a BHP Billiton (BHP) subsidiary that holds interests in four bauxite mines and one refining facility in the Republic of Suriname. These interests were part of joint ventures between AWA LLC's wholly-owned subsidiary in Suriname (Suriname Aluminum Company LLC (Suralco)) and BHP's subsidiary in which Suralco held a 55% stake and BHP's subsidiary held a 45% stake. This acquisition strengthens Alcoa's presence in Suriname and supports its overall growth strategy. In this transaction, in exchange for relinquishing BHP of any further obligations, liabilities, and responsibilities related to the joint ventures (certain of which could result in the recognition of charges in future periods), AWA LLC received direct ownership of the BHP subsidiary. This transaction was accounted for as an asset acquisition as it did not meet the requirements to be accounted for as a business combination. Prior to the completion of this transaction, Suralco accounted for its 55% interest in the Suriname operations on the proportional consolidation method. The assets and liabilities of the former BHP subsidiary were included in the Alumina segment beginning July 31, 2009 and 100% of the results of the Suriname operations were reflected in this segment starting on August 1, 2009. This acquisition resulted in the addition of 993 kmt of alumina refining capacity (2,207 kmt is total refinery capacity – approximately 870 kmt is curtailed) to Alcoa's global refining system. Alcoa recorded a gain of $92 million ($36 million after-tax and noncontrolling interest).

Divestitures



Rolling Mill in Belaya Kalitva, Russia


In March 2015, Alcoa completed the sale of a rolling mill located in Belaya Kalitva, Russia to a wholly-owned subsidiary of Stupino Titanium Company. While owned by Alcoa, the operating results and assets and liabilities of the rolling mill were included in the Global Rolled Products segment. The rolling mill generated sales of approximately $130 million in 2014 and, at the time of divestiture, had approximately 1,870 employees. The divestiture resulted in net cash received of $30 million.



2014 Divestiture of Four Operations


In 2014, Alcoa completed the divestiture of four operations. Combined, these transactions yielded net cash proceeds of $247 million. 1) In November 2014, Alcoa completed the sale of an aluminum rod plant located in Bécancour, Québec, Canada to Sural Laminated Products. This facility takes molten aluminum and shapes it into the form of a rod, which is used by customers primarily for the transportation of electricity. While owned by Alcoa, the operating results and assets and liabilities of this plant were included in the Primary Metals segment. In conjunction with this transaction, Alcoa entered into a multi-year agreement with Sural Laminated Products to supply molten aluminum for the rod plant. The aluminum rod plant generated sales of approximately $200 million in 2013 and, at the time of divestiture, had approximately 60 employees. 2) In December 2014, Alcoa's majority-owned subsidiary (60%), Alcoa World Alumina and Chemicals (AWAC), completed the sale of its ownership stake in a bauxite mine and alumina refinery joint venture in Jamaica to Noble Group Ltd. The joint venture was 55% owned by a subsidiary of AWAC, which is 40% owned by Alumina Limited. While owned by AWAC, 55% of both the operating results and assets and liabilities of this joint venture were included in the Alumina segment. As it relates to AWAC's previous 55% ownership stake, the refinery (AWAC's share of the capacity was 778,800 metric-tons-per-year) generated sales (third-party and intersegment) of approximately $200 million in 2013, and the refinery and mine combined, at the time of divestiture, had approximately 500 employees. 3) Also in December 2014, Alcoa completed the sale of its 50.33% ownership stake in the Mt. Holly smelter located in Goose Creek, South Carolina to Century Aluminum Company. While owned by Alcoa, 50.33% of both the operating results and assets and liabilities related to the smelter were included in the Primary Metals segment. As it relates to Alcoa’s previous 50.33% ownership stake, the smelter (Alcoa's share of the capacity was 115,000 metric-tons-per-year) generated sales of approximately $280 million in 2013 and, at the time of divestiture, had approximately 250 employees. 4) Additionally in December 2014, Alcoa completed the sale of three rolling mills located in Spain (Alicante and Amorebieta) and France (Castelsarrasin) to a subsidiary of Atlas Holdings LLC. While owned by Alcoa, the operating results and assets and liabilities of the rolling mills were included in the Global Rolled Products segment. In conjunction with this transaction, Alcoa entered into a multi-year agreement with the buyer to supply aluminum for the rolling mills. The rolling mills combined generated sales of approximately $500 million in 2013 and, at the time of divestiture, had approximately 750 employees.



Tapoco Hydroelectric Project


In November 2012, Alcoa completed the sale of its 351-megawatt Tapoco Hydroelectric Project to Brookfield Renewable Energy Partners for $597 million in cash. Alcoa recognized a gain of $320 million ($173 million after-tax). This transaction is subject to certain post-closing adjustments as defined in the purchase agreement. Tapoco is a four-station hydroelectric project located on the Little Tennessee and Cheoah Rivers in eastern Tennessee and western North Carolina. The transaction included four generating stations and dams, 86 miles of transmission lines, and approximately 14,500 acres of land associated with and surrounding Tapoco. The power generated by Tapoco was primarily consumed by Alcoa's smelter in Tennessee, which was temporarily idled in 2009 and permanently shut down in 2011. Since 2009, the power generated from Tapoco was sold into the open market.



Transportation Products Europe Business


In April 2010, Alcoa completed the divestiture of the Transportation Products Europe business, the assets and liabilities of which were classified as held for sale in 2008, to two separate buyers. Combined, this business sold for $14 million, which was included in Proceeds from the sale of assets and businesses on the accompanying Statement of Consolidated Cash Flows; a gain of $5 million ($5 million after-tax) was recognized in Restructuring and other charges on the accompanying Statement of Consolidated Operations. These two transactions are no longer subject to post-closing adjustments. This business generated sales of $78 million in 2009 and, at the time of divestiture, had approximately 360 employees at three locations.



Divestiture of the Electronics Portion of the EES Business


In December 2009, Alcoa completed the divestiture of the electronics portion of the EES business to Flextronics Inc. Alcoa paid $4 million upon consummation of the transaction and recognized a loss of $9 million ($13 million pretax) in discontinued operations on the accompanying Statement of Consolidated Operations. This transaction remains subject to certain post-closing adjustments as defined in the purchase agreement. Proceeds from the sale of assets and businesses on the accompanying Statement of Consolidated Cash Flows include this payment as a cash outflow. The electronics portion of the EES business generated sales of $104 million in 2008 and, at the time of divestiture, had operations in four countries employing approximately 450 employees.



Wire Harness and Electrical Portion of the EES Business


In June 2009, Alcoa completed the divestiture of the wire harness and electrical portion of the EES business to Platinum Equity, effective June 1, 2009. Alcoa paid $200 million to divest this portion of the EES business and recognized a loss of $129 million ($168 million pretax) in discontinued operations. The total cash payment was comprised of the agreed upon transaction price of $175 million and working capital and other adjustments of $25 million based on the provisions of the purchase agreement. This transaction is no longer subject to post-closing adjustments. Proceeds from the sale of assets and businesses on the accompanying Statement of Consolidated Cash Flows include the $200 million as a cash outflow. The wire harness and electrical portion of the EES business generated sales of $1,114 million in 2008 and, at the time of divestiture, had operations in 13 countries employing approximately 16,200 employees. In early 2010, Alcoa recognized an additional loss of $6 million ($9 million pretax) in discontinued operations as a result of a contract settlement with a former customer of this business. Separately, the legal entity that operated the previously sold wire harness and electrical business in Germany filed for insolvency. No lawsuits were filed against Alcoa related to this bankruptcy; however, Platinum Equity did file claims against Alcoa in the proceeding. In 2011, Alcoa recognized an additional loss of $3 million ($5 million pretax) in discontinued operations as a result of a negotiated settlement related to these claims.



Foil Plants Divesture


In late 2009, Alcoa completed the sale of two of its foil plants (Sabiñánigo, Spain and Shanghai, China), which were part of the Global Foil business, the assets and liabilities of which were classified as held for sale in 2008, to two separate buyers. Combined, these two facilities were sold for $20 million, which was included in Proceeds from the sale of assets and businesses on the accompanying Statement of Consolidated Cash Flows, and resulted in a net loss of less than $1 million. These two transactions are no longer subject to post-closing adjustments. These two locations generated sales of $169 million in 2008 and, at the time of divestiture, had approximately 460 employees.

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