Alcoa, New York, announced on May 4 that it has agreed to sell its wire harness and electrical distribution business to Platinum Equity, a California-based private equity group. The terms of the sale were not disclosed. The wire harness and electrical distribution business is the largest part of the Alcoa Electrical and Electronic Solutions business, which the company announced was for sale in January.
The transaction is expected to be completed by the end of the second quarter of 2009. The sale includes operations in 13 countries and involves approximately 17,500 employees.
Alcoa is also in discussions with multiple parties on the sale of the remainder of the Electrical and Electronics business, which consists of the electronics portion of the operation. That business has approximately 500 employees in three European countries. Alcoa expects to record a loss on discontinued operations in connection with the closing of the sale of the wire harness and electrical distribution business.
At press time, EM was unable to confirm whether DixieWire Sales, San Antonio, Texas, was included in the acquisition. DixieWire’s product line includes insulated and non-insulated wire, multi-conductor cables, battery cables, convoluted tubing, and other logistical services to the automotive, appliance, electronic, power, control and signal, and building markets.
Platinum Equity was founded in 1995, and has a global portfolio of operating companies. During the past two years, Platinum has been actively pursuing investment in companies involved directly and indirectly in the automotive industry.
Alcoa is the world leader in the production and management of primary aluminum (ingots and billets) and fabricated aluminum, and its Alcoa Primary Metals unit is a major supplier to the electrical cable, magnet wire and steel industries. This unit has production facilities located in Becancour and Baie-Comeau, Canada. In total, the company has 87,000 employees in 35 countries and $26.9 billion in 2008 revenues.
Alcoa recently reported a 27 percent drop in revenue resulting in a loss of $480 million for the first quarter of 2009, which it said in a press release reflected the impact of the economic downturn on its core industrial and commercial markets and a historic decline in aluminum prices. Revenues for the first quarter 2009 were $4.1 billion, down from $5.7 billion in the fourth quarter 2008, and down 36 percent from $6.5 billion in revenues in the first quarter of 2008 after excluding divested businesses.
The sharp drop in revenue resulted from the impact of the downturn on Alcoa’s end markets — automotive, transportation, building and construction and aerospace. As demand weakened during the quarter in those markets, realized metal prices fell an additional $558 a ton — a 26 percent price decline — resulting in prices that are now about 60 percent lower than last summer.