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Smith helms Noranda’s trip from private to public firm

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Noranda Aluminum Holding Corp. is growing up. Once a small subsidiary of both Falconbridge Ltd. and Xstrata Plc, then a privately held asset of investment fund Apollo Management LP, Noranda has finally stepped into the public spotlight on its own two feet—and according to its top executive, its stance has never been stronger.

"It's a real transformation going from a small part of a large company to being an independent company owned by private equity and now a publicly owned company. The company was really on a journey, and the IPO (initial public offering) was a step in that journey," Layle K. "Kip" Smith, president and chief executive officer of Noranda, said in an interview at AMM's head office in New York.

Each step in that journey has brought its own challenges, Smith said, particularly Noranda's original transition from a back-to-back unit of two large mining conglomerates to a stand-alone entity. "There are structural issues when you do a carve-out. There are some things you have to deal with when you go from being a small part of a big company—you have to build your own process backbone, you're (used to being) reliant on corporate to do a lot of things and your identity is really aligned with a much bigger organization," he said.

But obstacles aside, the 2007 move from small subsidiary to private equity proved to be the right step for Noranda, Smith said, as did this spring's subsequent shift from the private to public sphere.

"The IPO was another step in a journey of transformation that Noranda has been on during various stages of ownership," he said. "It was an integral part of our strategy to strengthen our company by paying down debt and by having more financial flexibility with access to the public markets."

Noranda launched its initial public offering of 11.5 million shares at $8 apiece in May, raising $81.6 million in net proceeds, all of which went to pare down the Franklin, Tenn.-based vertically integrated aluminum producer's debt. The company had hoped to raise upwards of $230 million when the shares were expected to be priced at between $14 and $16 apiece, but a tanking aluminum market in the days leading up to the launch forced the company to reevaluate.

But Smith wasn't deterred. "We felt, even at the price that we went out, that that was successful for us. It was a very difficult time in the market and we were able to achieve our two primary goals there, which was to pay down debt and to create additional flexibility for us," he said.

Smith's calm demeanor in the face of a complete structural overhaul comes from years of practice. Smith, 55, led Resolution Performance Products LLC through its 2005 merger with the larger Hexion Specialty Chemicals Inc., then turned around and led Covalence Specialty Materials Corp. through a merger with Berry Plastics Corp. just two years later. All four—Resolution, Hexion, Covalence and Berry—were Apollo portfolio companies, making Noranda Smith's fifth stint with the acquisitive New York fund.

"This is my fifth time with these guys and I can tell you it's been a real privilege because they've been very, very supportive," said Smith, who was named to Noranda's top slot in March 2008.

Apollo also is involved in the aluminum sector through holdings in Metals USA Inc. and Aleris International Inc., and has put forward a binding offer to purchase a majority stake in Alcan Engineered Products. "Apollo understands that they are an investor and they really do let us run the business. That being said, they've been extremely helpful active board members and very supportive of our plans and programs to create short-term and sustainable value," he said.

Although Smith has company-hopped under Apollo in the past, an early move from Noranda's helm is not on the radar, he said. "For me, Noranda is really my home and it's the place I'm investing my time to build a truly great company. I really enjoy being here. It's not intended to be a transitional role."

Just like the shift from an Xstrata division to an Apollo subsidiary brought with it changes, so too has the transition from private to public company, said Smith, even with Apollo still owning a 78-percent stake. One of those changes felt most strongly by Noranda's leadership team is more-stringent reporting requirements by the U.S. Securities and Exchange Commission. "There's more communication," Smith said, "and as we communicated to our employees, more people are now depending on us."

But other aspects of the company have remained the same, despite the shift in structure. "Our job as employees of Noranda—for the vast majority of people—hasn't really changed," he said. "There are things we can control and things we can't control. We can't control the European economy, we can't control the growth rate of China, but what we can control are the value creators that are inherent in Noranda. Every day we come to work and build a sustainable integrated aluminum company, and that just hasn't changed." ANNE RILEY


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