BHP, Alcoa Agree to Merge Units
BHP Billiton, the world’s largest mining company, said today that it agreed to merge its North American metals distribution business with Alcoa Inc.’s unit to reduce costs as prices slide.
The venture may help BHP Billiton and Alcoa weather a global economic slowdown that cut profit at rivals such as WMC Ltd.
Melbourne-based BHP also said net income for its fiscal year ended June 30 rose to $2.2 billion, or 37 cents a share, from $1.74 billion, or 30 cents, a year earlier.
By merging the units, BHP and Alcoa are boosting market share in the U.S., the top buyer of copper used in building. BHP acquired the distribution business as part of its $1.7-billion takeover of Rio Algom Ltd. of Canada.
BHP said it agreed to merge its Vincent Metals Goods distribution business in the U.S. and the Atlas Ideal Metals unit in Canada with Alcoa’s Reynolds Aluminum Supply Co.
The new company, a 50-50 joint venture, had combined revenue of $2.1 billion in fiscal 2000. Terms of the agreement weren’t disclosed.
“I think it just provides them with much better scale and much wider distribution,” said Glyn Lawcock, a resources analyst with UBS Warburg in Sydney, Australia. “It was a smaller business for them, and now that they’ve tied it up with Alcoa, it’s a far-reaching, bigger venture for them.”
BHP Chief Executive Paul Anderson said in a statement, “While we may be less than happy with the current prices of copper or nickel, we take some comfort that our overall portfolio provides diversification markedly superior to most companies in the resources sector.”
On Friday, shares of Pittsburgh-based Alcoa ended at $36.69, up 40 cents, and BHP shares rose 60 cents to close at $10.20, both on the New York Stock Exchange.
