What happened
Shares of Arconic (ARNC) skyrocketed this week and were trading 26.4% higher as of 11:30 a.m. Friday, according to data provided by S&P Global Market Intelligence.
Arconic produces aluminum products for various industries, including aerospace, automotive, defense, construction, and commercial transportation. Rumor is that a private equity firm is looking to acquire the company now.
So what
Private equity firm Apollo Global Management reportedly submitted an offer to acquire Arconic in February, according to a report from The Wall Street Journal this week. The report further stated Arconic's advisors have approached other potential acquirers as well.
The rumor of Arconic being bought out has been floating in the market for some years now, with Apollo's name occasionally popping up as a potential acquirer. In 2019, Apollo reportedly was almost close to finalizing a deal to buy the aluminum parts supplier for more than $10 billion, but nothing was officially announced.
In 2020, Arconic split itself into two stand-alone companies -- the company Arconic as we know of today, and Howmet Aerospace, which manufactures components and parts for aerospace and wheels for heavy trucks.
Now what
Arconic has seen its fair share of challenges since it was formed after the spinoff from aluminum giant Alcoa in 2016, including an ugly feud with an activist investor. The company has also struggled to grow earnings in recent years, partly because of lingering macroeconomic headwinds.
Arconic recently reported a 9% drop in year-over-year sales for its fourth quarter. For full-year 2022 though, Arconic's sales climbed 19%, and net loss more than halved to $182 million. This year, Arconic sees its revenue dropping by roughly 5% to 11%, which means 2023 will likely be another year of losses for the company.
During such times, and with Arconic shares losing 36% value in 2022, it's not surprising to see the market bid the stock higher in anticipation of a buyout deal.
