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Alcoa may sell packaging, consumer business

Alcoa Inc., the world’s largest aluminum company, said on Wednesday that it might put its packaging and consumer business up for sale, sending its share price higher.
/ Source: Reuters

Alcoa Inc., the world’s largest aluminum company, said on Wednesday that it might put its packaging and consumer business up for sale, sending its share price higher.

The company said it would explore strategic alternatives for the business, which makes consumer products like Reynolds Wrap. Joint ventures are another possibility.

“We’re going to look at all options available,” said Alcoa spokesman Kevin Lowery.

Lowery said Alcoa had hired bankers to advise in the process, but would yet disclose them.

Alcoa expects to complete the process by the end of 2007.

“To me it is another step in their program of trying to improve their investment returns,” said analyst Charles Bradford of Bradford Research/Soleil.

Bradford said the packaging and consumer business did not generate a very high return.

According to Alcoa, the business generated about 10 percent, or $3.2 billion, of the company’s revenue and about 3 percent, or $95 million, of after-tax operating income in 2006.

The packaging business employs about 10,000 people in 22 countries around the world.

Bradford said there might be buyers that are willing to pay a lot of money for this business, as it seems relatively stable and could take on debt.

The businesses that will be included in the review are flexible packaging, consumer products, Reynolds Food Packaging and Closure Systems International, Alcoa said in a statement.

“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 Chief Executive Alain Belda.

Separately, the company said it would also explore strategic alternatives for its electrical and electronic solutions unit and its automotive castings businesses.