Alcoa Agrees to Sell Automotive Castings Division

Nov. 6, 2007
Private equity group will consolidate operations with Compass

A private equity group has agreed to buy Alcoa Inc.'s Alcoa Automotive Castings operations for an undisclosed price, completing the sale that has been expected for several weeks. Alcoa announced its intent to sell the business in April, and in an October statement about its ongoing portfolio review, the group announced a sale of the Automotive Castings unit was near.

Alcoa continues to produce other automotive components, but it is still in the process of divesting its global packaging and consumer products operations. In the portfolio review update, Alcoa announced the sale of the Automotive Castings and Packaging businesses will result in after-tax restructuring and impairment charges of $845 million, which Alcoa characterized as "enabling it to focus on new growth opportunities."

Monomoy Capital Partners L.P. is a New York fund that says it invests in "middle market companies that require operational or financial restructuring." In 2006 it acquired Casting Technology Co. (CTC), Franklin, IN, from Amcast Industrial Corp.; CTC produces aluminum automotive components using a squeeze casting process. Also in 2006 Monomoy purchased Rossborough Supply Co. Inc., which included Magnesium Aluminum Corp., a diecaster of aluminum and magnesium steering wheels, steering columns, engine brackets and airbag enclosures; and SRC, a manufacturer of magnesium flux refining agents.

“Monomoy is committed to improving our portfolio companies by adding complementary assets and taking advantage of unique industry opportunities like those in the automotive supply chain,” stated partner Justin Hillenbrand. He predicted more similar acquisitions in the coming months.

AAC operates plants in Fruitport, MI, and Farsund, Norway, where it uses low-pressure casting to produce suspension and chassis components, including sub-frames, cradles, steering knuckles, engine brackets, and control arms.

Monomoy plans to merge AAC into its Compass Automotive Group L.L.C., a holding company it formed in July 2007. According to Hillenbrand, “The acquisition of Alcoa Automotive Castings is a perfect example of our investment thesis: AAC was a non-core asset for Alcoa but it is an ideal partner for Compass that we can improve and grow.”

“Alcoa Automotive Castings is a proven market leader with leading technology, well-regarded products and a strong industry position,” stated Compass CEO Craig Conaty. “Compass’ acquisition of AAC is an important part of our strategy to consolidate Tier II automotive suppliers and enables us to offer a full range of cost-effective, safety-critical component solutions to Tier I suppliers throughout the world.”

The investor now describes Compass as a "$220-million manufacturer and the leading North American supplier of safety-critical aluminum and magnesium components for chassis and suspension applications." It has recruited former Toyota Motor Manufacturing Kentucky executive Gary L. Convis to the board of directors of Compass, "to help Monomoy build Compass into an industry-leading automotive platform."