Elliott Management Buys Stake In Splitting Alcoa Inc (NYSE:AA)


Alcoa Inc (NYSE:AA) has got a new stakeholder with Elliott Management Founder Paul Singer buying a 5.1% stake in the company. Calling the company undervalued, Singer said that Alcoa’s decision of splitting the metal-making and manufacturing business was a good one.

The analysts are positive that the move of the company to split in two will boost shareholder confidence and open the possibility of new growth opportunities for the company. The lightweight metals company is valued at $11.4 billion and the division is supposedly going to be over by mid-2016. The bauxite, alumina, aluminum, casting and energy businesses have combined to generate $2.2 billion in 3Q15 and will be a part of the upstream firm. The other division will include the Engineered Products Solutions and Transportation and Construction with revenue of $3.4 billion in 3Q15.

Right Move by Alcoa

Sterne Agee CRT analyst Josh Sullivan said that the move of the company was in the right direction and it was just what was needed at a time when the growth story was dicey. Over the last two years, the company has been making investments in buying companies that can help strengthen the manufacturing division. It was during this time Alcoa has observed that it was making more money in the construction, aerospace and automotive product segment. This was also one of the reasons for the split.

One positive result has already been seen as Elliott Management bought a stake in the company after the split announcement only. A constructive dialogue was initiated between the two companies and they discussed on how to maximize the shareholder value and boost investment in Alcoa.

What’s Next

The separation has already started and the commodities and engineered goods are going their separate way. The fund that has been pumped in by Elliott can help the company in selling or restructuring of its power assets worldwide. The only division that remains left out as of now is the power-generation one and analysts suggest that the company could sell them off as they were not related to the two split companies. 2016 will be a changing period for Alcoa Inc (NYSE:AA).

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