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
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
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
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