After U.S. markets closed for trading yesterday afternoon, specialty aluminum products manufacturer Kaiser Aluminum Corp. (KALU:NASDAQ) announced that "it has entered into a definitive agreement to purchase Alcoa Warrick LLC, containing all the assets of the Warrick Rolling Mill from Alcoa Corp. (AA:NYSE) for a purchase price of $670 million." The company advised that the $670 million purchase price represents a multiple of around seven times adjusted EBITDA for the 12-month period ended September 30, 2020.
The firm stated that under the terms of the transaction Alcoa is to retain ownership of the related smelting assets, power plant and land. The agreement stipulates that Kaiser Aluminum will then be required to enter into a market price based molten aluminum supply agreement with Alcoa and execute a long-term ground lease.
The company stated that the Warrick operation located near Evansville, Ind., shipped over 675 million pounds of aluminum over the last 12 last twelve months of which approximately 60% was high-margin coated packaging products. The firm noted that Warrick facility includes casting, significant hot and cold rolling capacity, and a range of finishing and coating lines.
Kaiser Aluminum Corp.'s President and CEO Keith A. Harvey commented, "With Warrick's solid market position, highly favorable market dynamics and a strong and culturally compatible management team, the acquisition provides us an opportunity to significantly enhance and diversify our portfolio."
"The addition of a non-cyclic packaging business is highly complementary to our existing aerospace, automotive and general engineering cyclic end markets and provides excellent opportunities for long-term growth and synergy with our existing operations. Overall, the transaction is consistent with our longstanding strategy to acquire businesses that we understand at a price that creates long-term value for our shareholders, while continuing to adhere to our disciplined financial strategy for liquidity management and debt leverage," Harvey added.
The company advised that the transaction provides it with entry into the North American aluminum packaging industry, which fits in well with the ongoing shift from plastic to aluminum in the packaging industry in order to be more in line with industry sustainability trends.
Kaiser Aluminum noted that the transaction is expected to close on or about March 31, 2021, and is subject to customary closing conditions and regulatory approvals. The report did not list specifically whether the Boards of Directors or shareholders of each company have approved the transaction or if they will be required to authorize the sale.
Kaiser Aluminum is a leading producer of semi-fabricated specialty aluminum products headquartered in Foothill Ranch, Calif. The company markets its high value-added sheet, plate, extrusions, rod, bar, tube and wire products worldwide for use in aerospace and high-strength, custom automotive, general engineering and other industrial applications.
Kaiser Aluminum began the day with a market capitalization of around $1.2 billion with approximately 15.81 million shares outstanding and a short interest of about 2.5%. KALU shares opened 5% higher today at $82.00 (+$4.02, +5.16%) over yesterday's $77.98 closing price. The stock has traded today between $81.555 and $88.38 per share and is currently trading at $88.15 (+$10.17, +13.04%).[NLINSERT]
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