US metals firm Alcoa said today it would split into two publicly-traded entities.
The move shows the firm is acknowledging that its legacy aluminium operations and higher-value and automotive businesses were diverging and no longer compatible.
New York-based Alcoa's traditional smelting business has been hurt by a growing surplus of aluminium, which has caused prices to sink and deepened the industry's worst crisis in years.
At the same time, the company has bet on growth from higher-margin titanium and high-strength aluminium sales to the aerospace industry, citing a growing order book for airplane production and renewed global spending on cars.
Plane manufacturers have turned to lightweight titanium from aluminium and car makers to new, strong aluminium alloys instead of high-strength steel to improve performance and fuel efficiency.
Efforts by the world's third-largest producer of aluminium to address these diverging trends resulted in conflicting messages for investors, according to sources close to the company.
The split is expected to take place in the first half of 2016 and the legacy aluminium firm will retain the name Alcoa,the company said.
Chief executive Klaus Kleinfeld will become CEO of the new, unnamed entity and will remain chairman of Alcoa throughout the transition period.
The company did not provide a timeline for choosing a CEO for Alcoa after the split.
The division of the company does not need to be approved by shareholders, sources familiar with the matter said.
The legacy business had revenue of $13.2 billion in the 12 months ended June 30 and EBITDA of $2.8 billion, with 64 facilities and around 17,000 workers.
The new firm created by the split had revenue for the same period of $14.5 billion, with EBITDA of $2.2 billion, 43,000 workers and 157 facilities.
Through a series of acquisitions, the company says it is well positioned to take advantage of growing aerospace and automotive markets in the years to come.
About 40% of the revenue for the new "value-added" business came from the aerospace sector - a key area targeted for growth - for that period.
While Alcoa has tried to figure out what to do with its legacy business, including selling off some of its more traditional and costly smelting facilities, it has also been investing heavily in acquisitions to bolster its aerospace and automotive operations.
Recent purchases include aerospace and defence industry-focused titanium supplier, RTI International Metals, for $1.3 billion and privately-held TITAL, which makes titanium and aluminium structural castings for aircraft engines and airframes.
Falling aluminium prices led to Alcoa missing second-quarter earnings estimates and, so far this year, the company's stock is down more than 42%.
Some analysts have suggested that a split would benefit the company's aerospace and automotive business and could lead to a takeover of its traditional aluminium business.
The company has also been working to improve its own in-house technology. Last December, Alcoa unveiled a process it calls Micromill to produce high-strength aluminium alloy, targeting car makers who are seeking an alternative to heavier steel.
Micromill-made aluminium goes from molten metal to cooled, coiled metal in 20 minutes versus the 20 days it takes to roll conventional aluminium.
It is 30% stronger than regular aluminium, and far easier to shape into more intricate forms, including inside panels for car doors or bumpers.
