It was on track to be one of the biggest leveraged buyouts since the financial crisis.
Instead, metals company Arconic has ended negotiations with Apollo Global Management over a deal the would’ve reportedly valued the business at more than $15 billion, including debt. The announcement comes after months of talks, with news emerging last week that the two sides were close to striking an agreement. Apollo reportedly offered $22.20 per share for Arconic, which manufactures aluminum and titanium products for the aerospace, energy and automotive markets.
The company’s stock (NYSE: ARNC) plummeted 16% to $17.09 per share Tuesday, dropping its market cap to about $8.3 billion.
Apollo originally beat out bids from private equity heavyweights including Blackstone and The Carlyle Group, but negotiations were complicated. The company was still dealing with fallout after cladding panels produced by its building products division caught fire in the Grenfell Tower blaze that killed 72 people and displaced more than 200 households in 2017. Arconic said in its press release that it will continue to pursue a sale of its building products business, despite facing class-action lawsuits from investors in the US, along with other potential liabilities.
In retrospect, it probably wasn’t the ideal time for Arconic to take on a huge debt burden. The Trump administration’s 10% tariffs on aluminum imports have dimmed the company’s economic outlook. Though the deal was eventually fully financed, getting a loan was hard to come by thanks to a record-long dry spell in the junk bond market, per The Wall Street Journal. Even when credit markets are stable, deals of that size aren’t very common. There have been just eight US buyouts of $15 billion or more since the financial crisis, per the PitchBook Platform.
It’s not all bad news for Apollo. The firm has reportedly reached advanced talks to purchase European packaging giant RPC for more than $3.8 billion, per The Wall Street Journal. If a deal is struck, that should ease some pressure on Leon Black’s buyout shop as it looks to deploy a record $24.6 billion buyout fund closed in 2017.
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