SINGER’S LAMENT
High-rise inferno may cost investor big-time
The closely watched auction of aluminum giant Arconic has hit a snag, as prospective bidders have been recently told of potential liabilities related to last year’s deadly Grenfell Tower disaster in London, The Post has learned.
A unit of New York-based Arconic had supplied aluminum cladding that was partly blamed for the quick spread of the June 2017 fire in the 24-story residential building in West London, which killed 72 people.
Until recently, many insiders had gathered that the Grenfell Tower tragedy wasn’t a major financial worry for Arconic.
Prodded by billionaire Paul Singer’s hedge fund Elliott Management, Arconic hired Goldman Sachs to launch an auction of the company this summer, according to sources close to the process.
Nevertheless, skittishness grew over the weekend after prospective bidders did a late round of due diligence ahead of final bids that are due this week, according to sources close to the situation.
“There are some liability issues that have surfaced,” a source said. “This came to bidders’ attention fairly late.”
Officials at Arconic, which could announce a sale as early as this week, declined to comment on Monday.
The auction of the company, which manufactures finished aluminum parts for the aerospace and auto industries, has attracted a bidding team that includes the Blackstone Group and Carlyle Group buyout firms.
Billionaire Leon Black’s Apollo Global Management is also still in the running, according to sources briefed on the auction process.
Now, however, there is concern that potential litigation over Grenfell Tower could crimp Arconic’s ability to shoulder the estimated $19 billion in debt required to finance a buyout, accord- ing to a source close to the bidding.
Apollo now appears to be most interested, sources said, but the buyout firm now may also be lowering its final offer significantly, from what was an expected $28 to $30 a share, two sources said.
An August 2017 class-action shareholder suit filed in Pittsburgh alleges that Arconic, formerly a part of aluminum mining giant Alcoa, knowingly sold panels with a combustible core for inappropriate uses, such as for use on high-rise towers.
Such litigation could gain traction if significant evidence of wrongdoing emerges in an ongoing investigation by Scotland Yard of the deadly disaster, a source said.
The company’s shares, which are down 8 percent since Oct. 8, fell 2 percent on Monday, to close at $21.45, giving the company a market capitalization of $10.4 billion. Arconic also carries $5.2 billion in debt.
Elliott, with its leading 10.8 percent Arconic stake, has been pushing for a sale since early 2017. Former CEO Klaus Kleinfeld was ousted in April 2017 after sending an apparently threatening letter to Elliott without the board’s approval, sources said.