Aluminum ‘foiled’

$20B tag could bust Arconic bid

The leveraged buyout of Arconic has run into a bit of turbulence, The Post has learned.

Potential bidders for the aluminum parts maker, including Apollo Global Management, KKR and a bidding team made up of Blackstone Group and Carlyle Group, have grown concerned about price, sources said.

Arconic, the former Alcoa division, sells parts to an aerospace sector that is at a cyclical high point — pushing up the potential price tag toward a possible $20 billion leveraged buyout, sources said.

“The auction is still a little early,” a source in the process said. “If I had to guess, there probably is no deal.”

Of course, circumstances could change, and a deal is still possible, other sources cautioned. The Goldman Sachs-run auction that started this summer will now likely not end until late October, sources said.

If a deal does come together, it will likely be the largest leveraged buyout in the last several years.

Blackstone agreed this year to buy Thomson Reuters’ financial and risk operations in what is now a $17 billion deal, the biggest LBO in 2018.

Shares of Arconic rose 1.2 percent on Friday, to $22.88, giving it a market cap of just over $11 billion.

Hedge fund activist Elliott Management won three Arconic board seats in May 2017, pushing shares on the day that happened to $27.60. Elliott earlier had successfully pressured Chief Executive Klaus Kleinfeld to resign.

Elliott now has a leading 11 percent stake in the company.

With the possible purchase price increasing as orders from Boeing and other customers pick up, a buyer will have to have the capital structure in place to protect itself in roughly five years, when the cycle may reverse and demand for airplane parts may fall, the source said.

That concern limits the amount of leverage a buyer may be prepared to place on the business.

Meanwhile, Arconic said the company is exploring a sale of its building and construction units and will announce the result of a review by the end of the year.

In late 2016, Arconic was split off from Alcoa’s mining and smelting operations.

Arconic, Apollo, Blackstone and KKR all declined to comment.

The Arconic leveraged buyout is supposed to be an up to $20 billion deal with bidders including Apollo Global boss Leon Black (right), but sources told The Post on Friday there’s only a 50-50 chance it’ll happen.