Apollo in talks to buy aerospace-parts maker Arconic
Arconic’s advisers have also reached out to other potential buyers
Private equity firm Apollo Global Management Inc. is in talks to acquire aerospace parts maker Arconic Corp., according to people familiar with the matter.
Apollo submitted a bid in February and has debt financing in place, the people said.
Arconic’s advisers at Goldman Sachs Group Inc. and Evercore Inc. have also reached out to other potential acquirers, the people said. There is no guarantee there will be a deal with any of them.
Arconic stock shot up nearly 20% to close at $26.44 on Tuesday after The Wall Street Journal reported on the bid, giving the Pittsburgh company a market value of about $2.6 billion. It also has a hefty debt load of more than $1.5 billion. Should there be a deal, it would be expected to carry a significant premium, the people said.
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Arconic Corp
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| ARNC | NO DATA AVAILABLE | - | - | - |
| APO | APOLLO GLOBAL MANAGEMENT | 175.03 | +1.18 | +0.68% |
Arconic, which makes parts for the aerospace, automotive, building and energy industries, has had a bumpy history.
After being separated in 2016 from the aluminum business that is now called Alcoa, the company faced a campaign from activist investor Elliott Investment Management LP, which resulted in the resignation of Arconic’s then-chief executive, Klaus Kleinfeld, and an overhaul of its board.
Arconic is now run by Timothy Myers, who took the CEO role in 2020.
Klaus Kleinfeld, Former Chief Executive Officer of Arconic, takes part in the Yahoo Finance All Markets Summit in New York, U.S., February 8, 2017. REUTERS/Lucas Jackson (Reuters Photos)
The Journal reported in 2018 that Apollo had expressed interest in a deal for Arconic. Apollo ultimately came close to an agreement to pay upward of $10 billion for the company, but the deal never happened. Arconic instead further divided into two independent, publicly traded businesses in 2020.
Arconic’s Engineered Products and Forgings businesses remained in the existing company, which was renamed Howmet Aerospace Inc. Its Global Rolled Products group became part of a new company that is now known as Arconic Corp.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| HWM | HOWMET AEROSPACE INC. | 116.70 | -0.48 | -0.41% |
Arconic recently reported that its revenue for the fourth quarter totaled $1.9 billion, down 9% from the prior year as higher interest rates fanned anxiety about the economy. Its net loss widened to $273 million, or $2.70 per share, from $38 million, or 36 cents, a year earlier.
The deal would come at a muted time for private-equity buyouts. A tough financing market — coupled with a disconnect between buyers and sellers on price after equity values plummeted last year — has created roadblocks to deals.
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Apollo Global Management Inc. (Pavlo Gonchar/SOPA Images/LightRocket via Getty Images / Getty Images)
Private-equity firms have turned more to private lenders, while some have opted to put more of their cash to work in new investments. Apollo, which has a large credit arm, has the ability to be creative in the structuring of its deals.
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The firm, which has over $500 billion in assets under management, recently led the purchase of $900 million in convertible preferred stock of Western Digital Corp., along with Elliott.