Mexico's Alfa to spin off rest of Nemak stake, shares surge

By Daina Beth Solomon

MEXICO CITY (Reuters) - Mexico's Alfa said on Friday it plans to spin off the entirety of its remaining 75% stake in auto parts business Nemak , sending Alfa's shares surging 17% on the prospect that the conglomerate could shrug off the struggling unit.

If shareholders approve the proposal at an Aug. 17 meeting, they would receive one share of Controladora Nemak for each of their Alfa shares and retain share ownership in Alfa's equity.

"We plan a gradual and orderly transition process to make Nemak an independent business," Alfa President Alvaro Fernandez Garza said in a statement.

Controladora Nemak would be listed on Mexico's stock exchange following the spinoff, Alfa said. Nemak, which began to trade publicly in 2015, would stay listed separately.

Nemak shareholders in the future would be able to decide whether to merge with Controladora Nemak, Alfa said.

A 75% share of Nemak's market cap is currently equivalent to 12.15 billion pesos ($547 million), according to Refinitiv data.

Nemak, which makes aluminum parts for automakers, including Ford, General Motors, Fiat Chrysler Automobiles and Toyota, saw second-quarter results battered by shutdowns of light-vehicle production due to the coronavirus crisis.

It posted a $125 million loss, and revenue shrank 60% from 2019, making it the worst-performing of Alfa's public companies.

Analysts said investors would likely cheer Alfa cutting ties with Nemak, which could suffer further from the economic blows of the coronavirus pandemic.

"Nemak is a business that... weighed negatively on Alfa's results," Intercam said in a report. "This transaction should be highly positive for Alfa."

Alfa also owns 82% of petrochemicals company Alpek and 53% of telecommunications provider Axtel . It is the full owner of food business Sigma, and oil and gas unit Newpek.

The company plans to sell the majority of Newpek's U.S. assets this year.

(Reporting by Daina Beth Solomon, Dave Graham and Abraham Gonzalez; Editing by Nick Zieminski and Jonathan Oatis)

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