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CRU Aluminum: Apollo Management Group Set to Acquire Arconic

May 12, 2023

Private equity firm Apollo has been looking to add Arconic to its portfolio for some time. Almost since its spin-off from its upstream parent, Alcoa, in 2016, Arconic’s assets and key position in the aluminum semis value chain have been on Apollo’s radar. The deal is expected to close before the end of 2023, at $30 per share, nearly a 30% premium from when word of the acquisition circulated in February.

CRU

Arconic’s assets are storied, long-time cornerstones of North American aluminum semis manufacturing: rolled products, extrusions, and wire-rod-bar operations at Davenport, Iowa; Lancaster, Pa.; Knoxville, Tenn.; Lafayette, Ind., and Massena, New York, respectively. With established strategic supply chain relationships with aerospace, ground transportation, beverage can, consumer durable, and building products end-use segments, Arconic’s diverse portfolio looks to tap into the growth that CRU has forecast.

For the period 2022-2027, CRU models US flat-rolled products demand to increase by 1.428 million metric tonnes. Transportation applications, aerospace, automotive, truck, and truck trailer applications will draw 46% of that new demand. Beverage packaging will play a significant role in that demand growth, taking more than 30% of the expected growth in rolled-products consumption.

While Arconic is not a part of the new wave of US rolling mill investments that are set to begin production during this period, it does have an established position in these two key end-use segments, where product qualification and ramp-up are prolonged processes.

The $3-billion Apollo offering, and market momentum, seem a welcome match for Arconic’s aluminum operations’ history. Despite the near-term demand doldrums in beverage packaging and construction end-use applications, Arconic’s portfolio play affords some insulation from demand volatility. While nearby seasonal demand is still a question, the extended forecast for aluminum demand is squarely aligned with Arconic’s production capabilities and underpins the deal.

Learn more about CRU’s services at www.crugroup.com

By Stephen Williamson, CRU Research Manager, stephen.williamson@crugroup.com