Alcoa Corporation has signed an agreement to sell its rolling mill business, held by Alcoa Warrick LLC, to Kaiser Aluminum for a total of USD670m.
The rolling mill agreement includes the casthouse, hot mill, cold mills, and coating and slitting lines. Approximately 1,170 employees will become employees of Kaiser Aluminum once the transaction is complete. The rolling mill produces 310,000 t of flat rolled aluminium annually for use in packaging, including food containers, aluminium cans and bottles. 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 aluminium manufacturing site near Evansville, Indiana. Alcoa will retain ownership of the site’s 269,000-tpy aluminium smelter and its electric generating units. The company will also enter into a ground lease agreement with Kaiser for property that Alcoa will continue to own at the Warrick site.
Rolling mill agreement is part of Alcoa’s cash-generating programme
The agreement is part of Alcoa’s strategy to generate between USD500m and USD1bn in cash through the sale of non-core assets and will put total cash proceeds in the target range. Earlier in 2020, Alcoa announced the sale of its former waste treatment business in Gum Springs, Arkansas, and received USD200m in cash with an additional USD50m 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 boss Roy Harvey. 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 around 660 people.
After closing, Alcoa expects annual decreases in sales of USD800m, net income (pre- and after-tax) of USD45-55m, and adjusted Ebitda of USD90-100m. Alcoa expects to spend around USD100m for site separation and transaction costs, with half of the sum being spent in 2021 and the remainder in 2022 and 2023.