Arconic no longer pursuing sale over price disagreements, shares tank

(Reuters) - U.S. aluminum products maker Arconic Inc ARNC.N said on Tuesday it was no longer pursuing a sale of the company because it had not received an acceptable offer, sending its shares plunging as much as 21 percent.

The decision was a blow to Elliott Management Corp, the hedge fund that sits on Arconic’s board and had tried to facilitate the company’s sale by helping to tackle potential legal liabilities.

Those liabilities stem from the company’s building and construction systems division, which makes facades, windows and framing products. Arconic’s Reynobond PE panels were used in the cladding of the Grenfell Tower apartment complex in London, England, where more than 70 people were killed in a 2017 blaze.

Arconic on Monday was negotiating a sale of the company to private equity firm Apollo Global Management LLC APO.N, people familiar with the matter said. Those talks ended after Arconic's board rejected a fully financed $22.20 per share bid, saying it was inadequate, the sources added. The offer was worth about $17 billion, including Arconic's $6.3 billion total debt. Apollo declined to comment.

Shares of the company sank 16.4 percent to $16.99 on Tuesday afternoon in New York, giving Arconic, which was spun out of Alcoa Corp AA.N in 2016, a market capitalization of $8.2 billion.

A deal for Arconic would have been one of the largest leveraged buyouts since the 2008 financial crisis. It would have come after U.S. President Donald Trump’s imposition of aluminum tariffs that have driven up some costs for Arconic, which makes aluminum components for cars and airplanes.

Apollo initially offered more for Arconic, but lowered its bid as its due diligence revealed the potential liabilities related to Grenfell, the sources said. As the offer price went down, the board became reluctant to accept a deal, they said.

In a bid to save the deal, Elliott had proposed a structure that would place the liabilities of Arconic’s cladding business in a separate entity, Reuters has reported.

Arconic, which counts the world's top planemakers Boeing Co BA.N and Airbus SE AIR.PA among its customers, said on Tuesday it would continue to explore a sale of its building and construction division.

The next steps for Elliott, Arconic’s biggest shareholder with an 11 percent stake, are not clear. If the hedge fund continues to push for a sale, it could nominate more board directors next month to Arconic’s board to pressure the company.

Elliott declined to comment on its plans on Tuesday.

Reporting by Liana B. Baker and Greg Roumeliotis in New York; Additioanl reporting by Ankit Ajmera in Bengaluru; Editing by Anil D’Silva and Bernadette Baum