Alcoa expands, will explore value of castings business in corporate shakeup.

Alcoa, Pittsburgh, Pa., announced it will explore strategic alternatives involving its automotive castings and electronics businesses, while filing an unsolicited offer to acquire all of the outstanding shares of Alcan Inc., Montreal.

The Alcan offer, which was rejected, was to acquire the company's shares for $58.60 in cash and 0.4108 of a share of Alcoa common stock for each outstanding common share of Alcan.

Several days after announcing the exploration of the automotive castings and electronics businesses, Alcoa changed the name of its investment cast and forged products unit to Alcoa Power and Propulsion. The automotive business, a portion of the newly named enterprise, and the electronics business had combined 2006 revenues of about $1.6 billion and were marginally profitable.

"While there can be no assurance that exploration of alternatives will result in any type of transaction, this initiative should unlock the value in these businesses," said Alain Belda, Alcoa chairman and CEO.

The exploration of market value, which may end in a sale, comes in conjunction with analysis of Alcoa's packaging and consumer segment, which generated approximately $3.2 billion in revenues and $95 million in after-tax operating income in 2006, representing approximately 10% of revenues and approximately 3% of operating income.

"Now is the right time for us to explore whether these businesses may provide more value on their own or as part of another company," Belda said. "We are in an enviable position with our other downstream businesses, [including] the group of assets in our Flat Rolled Products segment, our hard alloy extrusions, forgings, fasteners, investment castings, structures and building systems."

Alcoa anticipates the exploration will be completed by the end of 2007.

The company also completed multiple manufacturing expansions, including in turbine airfoil casting capacity, Whitehall, Mich., and turbine airfoil core capacity, Morristown, Tenn.

The aerospace expansion, announced during an Alcoa Aerospace industry briefing, also includes Alcoa's aluminum manufacturing and heat-treated sheet and plate capacity.

These additions represent a 50% expansion in these product forms. Expansions in aluminum manufacturing capacity were completed at Alcoa mills in four countries. The new capabilities in the heat-treated sheet and plate capacity were announced in Davenport, Iowa, Kitts Green, U.K., Fusina, Italy, and Belaya Kalitva, Russia.

In addition to the metalcasting expansions, Alcoa's Power and Propulsion Systems' global manufacturing capabilities now include a new airfoil post-cast operation in Szekesfehervar, Hungary, and an expansion of airfoil post-cast operations in Acuna, Mexico. The company also told aerospace analysts and journalists that it plans to bring online five additional single-crystal casting furnaces in the next two quarters.

Alcoa's $3.1 billion aerospace portfolio now includes Alcoa Fastening Systems (approximately 25% of revenues), Alcoa Power and Propulsion (approximately 35%) and Alcoa's sheet, plate and hard alloy extrusions serving the structures market (approximately 40%).