Alcoa spinoff Arconic chooses to give up on plan to sell itself
After months of negotiations with potential buyers, Arconic will remain a publicly traded company and end its pursuit of a sale to private equity firms as part of its efforts to boost business.
In a statement issued Tuesday, Arconic chairman John C. Plant suggested the offers — reportedly being floated by Apollo Global Management — weren’t good enough for the aluminum products manufacturer, which split from Pittsburgh-based Alcoa in 2016.
“Together with management, we have been conducting a rigorous and comprehensive strategy and portfolio review over the past year and as part of that process considered a sale of the company, among other matters,” Mr. Plant stated.
“We did not receive a proposal for a full-company transaction that we believe would be in the best interests of Arconic’s shareholders and other stakeholders.”
An Arconic spokesman declined to comment.
Since it spun off from Alcoa, the New York-based company has fallen short of the benefits that were expected to come from the move.
The split was intended to lift the stock prices of both companies by segregating the upstream business that produces aluminum, plagued by low commodities prices, from the downstream businesses that manufacture products from the metal.
Mining, refining and smelting operations maintained the Alcoa name, and Arconic now manages those that make aluminum and titanium parts for the aerospace, automotive and other industries.
A distinctive glass building on the North Shore currently houses Alcoa and Arconic employees and bears both companies’ names.
But Arconic’s management struggled and the company’s board has faced demands for changes from activist investor hedge fund Elliott Management Corp., which forced out former Arconic CEO Klaus Kleinfeld in 2017. Today, Elliott has a board seat and is Arconic’s biggest shareholder with an 11 percent
stake.
In the past year, Arconic has trimmed costs.
In January 2018, the company announced a freeze of defined benefit pension plans for all 7,900 salaried and nonunion hourly employees, saving an expected $50 million in expenses last year.
At the end of the year, Arconic terminated its preMedicare medical and prescription coverage for retirees.
A sale to private equity was widely expected as the centerpiece of the review, with rumored negotiations surfacing last summer and growing through the fall. In October, Blackstone Group, Carlyle Group, Onex Corp. and Canada Pension Plan Investment Board formed a coalition to consider buying the company.
Last week, The Wall Street Journal reported that Arconic would be sold to Apollo for $10 billion, which would have been one of the largest leveraged buyouts in recent years. Arconic stock rose on the prospect of a sale, up 26 percent over the last month.
A possible hangup of the sale could have been a discussion of liabilities connected with the Grenfell Tower in London, which caught fire and killed 72 people in 2017. Arconic manufactured the cladding that was used in the tower.
In his statement, Mr. Plant said the company was continuing efforts to sell its construction unit, which makes up about 10 percent of sales but has all the liabilities from the Grenfell Tower fire.