Arconic Eyes Breakup After Strategic Review -- 2nd Update
February 08 2019 - 10:22AM
Dow Jones News
By Kimberly Chin
Arconic Inc. executives are planning to break apart the company,
culminating a long-running strategic review after nixing a
potential deal to go private and replacing the chief executive.
The aluminum-parts maker on Friday said it plans to separate its
portfolio into two units -- aerospace-focused engineered products
and forgings, and global rolled products aimed at the auto industry
-- and spin off one of them. The company, a big supplier to Airbus
SE, Boeing Co. and jet-engine makers, also said that it would sell
businesses that don't fit into the newly created units.
"After a rigorous and comprehensive process, we did not receive
a proposal for a full-company transaction that we believe was in
the best interests of our shareholders," said John Plant, the
company's recently named chief executive, in prepared remarks,
adding that the board decided restructuring the firm was the best
path forward.
Shares rose 1.3% on Friday after the company also said it would
cut costs by $200 million annually, cut its quarterly dividend and
increase its share buyback program. Its stock has fallen 27% in the
past 12 months.
On Wednesday, Arconic named Mr. Plant, who had been chairman, to
succeed Chip Blankenship as CEO. Mr. Blankenship, a former General
Electric Co. executive, who had served in the role since January
2018, had been conducting the review since arriving at the company
early last year.
Last month, the company nixed a potential $10 billion deal to be
acquired by private-equity firm Apollo Global Management LLC,
ending a monthslong sale process, The Wall Street Journal reported.
The Journal first reported in July that Apollo and other
private-equity firms were interested in buying Arconic.
Arconic itself was created when Alcoa Inc. broke into two
companies in 2016.
The process of slimming down Arconic's operations has already
started. In the fourth quarter, Arconic said it had closed the sale
of a Texarkana, Texas, rolling mill and its Hungary forgings
business.
Arconic's building-products business has also been up for sale.
That business faces potential liabilities related to the Grenfell
Tower fire in London in 2017, since exterior panels the company
produced were cited as a factor in the spread of the fire.
Arconic maintained its plan to buy back $500 million in shares
in the first half of this year. It also plans to authorize another
$500 million in buybacks through the end of 2020. It plans to
reduce its quarterly dividend to 2 cents, from 6 cents a share.
In its latest period, Arconic said it swung to a profit, helped
by stronger sales though it faced higher aluminum prices. The
year-earlier results also contained a $719 million goodwill
impairment.
Net income was $218 million, or 44 cents a share, compared with
a loss of $727 million, or $1.51 a share, a year earlier. Sales in
the quarter ended Dec. 31 rose 6% to $3.47 billion. Excluding
restructuring costs and other special items, Arconic's profit was
33 cents a share.
Analysts surveyed by Refinitiv expected adjusted earnings of 30
cents a share and revenue of $3.42 billion.
Arconic said it would also proceed with $500 million in buybacks
it had previously authorized for the first half of 2019. It also
plans to authorize another $500 million through the end of
2020.
Sales in its engineered products and solutions business rose 8%,
boosted by higher volume growth in aerospace engines and defense.
The global rolled products segment reported a 9% increase in
revenue.
The engineered products and solutions segment made up roughly
45% of sales last year, while global rolled products accounted for
40%.
This year Arconic expects full-year adjusted earnings of $1.55
to $1.65 a share and revenue between $14.3 billion to $14.6
billion.
Write to Kimberly Chin at kimberly.chin@wsj.com
(END) Dow Jones Newswires
February 08, 2019 10:07 ET (15:07 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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