Platinum Equity Buys Alcoa Unit
The natural resource companies expects the divestiture to be the first of a series of upcoming asset sales.
June 16, 2009
As industrial and natural resource companies increasingly look for opportunities to relieve their mounting debt, Platinum Equity, a California-based private equity group bought Alcoa, Inc.’s wire harness and electrical distribution unit. Financial terms of the transaction were not disclosed.
The transaction, which is believed to be the first of several upcoming divestitures, was announced on April 30th. In an analyst report obtained by Thomson ONE Analytics, J.P.Morgan’s Michael Gambardella said the company’s president and chief executive Klaus Kleinfeld “has challenged his businesses to earn the right to be in Alcoa’s portfolio and has given managers hard and fast targets to achieve this.”
In speaking with MergersUnleashed, Alcoa’s director of corporate communications, Kevin Lowery, said the company’s Beloit, Wisconsin manufacturing facility is for sale. The plant was used to produce cast auto wheels. Alcoa exited the business unit in May.
In addition, Lowery said the Pittsburgh-based aluminum producer is “talking with a couple different parties as we speak” about the sales of the global foil business, the remainder of the electrical and electronic systems business (separate from the Platinum Equity transaction), and the European transportation products unit.
Platinum Equity principal Mark Barnhill told MergersUnleashed that the private equity firm hopes to “ensure not only that the carve-out is competitive, and that it is a strong and profitable standalone operation.”
Alcoa is not the only natural resource company struggling amidst the challenging economic downturn. In December 2008, Australian mining and resources company Rio Tinto, under pressure to relieve its massive debt, said it would severely scale back the company’s operations, cutting 14,000 employees and hinting at extensive divestitures. In February, U.K.-based Anglo American said it would cut 9000 jobs and suspended its dividend payment for the first time in 60 years.
Lowery said Alcoa has “a focus on cash. Our plan is to be cash neutral this year, and cash positive next year.” He said he sees the current challenges “as an opportunity to come out of the downturn stronger than our competitors.”
Last week, Platinum Equity said it reached a deal to acquire most of Delphi’s global operations. Delphi, a Troy, Michigan-based parts maker that was spun out from GM in 1999, entered in bankruptcy protection in 2005.
Platinum Equity was founded in 1995 by Tom Gores. Alcoa shares opened Tuesday at $11.42 per share and traded at $10.85 as of press time.
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