Shares of Arconic (ARNC) moved lower in Friday trading after the aluminum products maker said it would explore the potential sale of certain businesses and plans to split itself into two units, with a spinoff of one unit at a later date.
SPLIT NEWS: Arconic said on Friday that it would split itself into two units -- Engineered Products & Forgings and Global Rolled Products -- and will spin off one of them at a later date. In addition, Arconic said it will explore the potential sale of businesses that do not best fit into Engineered Products & Forgings or Global Rolled Products. Chairman and Chief Executive Officer John Plant said in a statement that "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." He added that the company's board "sees more shareholder value creation through a restructuring of the company." As part of the strategy and portfolio review, Plant said Arconic has decided to separate the portfolio.
QUARTERLY RESULTS, ETC: Meanwhile, Arconic also reported fourth quarter results. Adjusted earnings per share of 33c beat the 30c consensus, while revenue of $3.5B was also higher than the $3.42B the Street was expecting. Looking ahead, Arconic sees fiscal 2019 adjusted EPS of $1.55-$1.65, while revenue is expected to be $14.3B-$14.6B. Analysts currently expect FY19 EPS of $1.58 and revenue of $14.43B.
Additionally, Arconic announced that its board authorized an additional $500M share repurchase program, effective through the end of 2020. The company said it plans to execute its previously authorized $500M share repurchase program in the first half of 2019. Arconic also said it expects to lower its quarterly dividend to 2c per share from 6c.
WHAT'S NOTABLE: Friday's news comes days after Plant took over as CEO, cutting ties with former CEO Chip Blankenship two weeks after the company walked away from a deal to be acquired by Apollo Global (APO). Two people familiar with the board's plans told The Wall Street Journal that Blankenship lost the support of Arconic's board after failing to get a majority of its 12 directors to agree to Apollo’s $10B takeover offer. Putting a one-year limit on Plant's tenure suggested he may again try to sell the company, but he would be starting from scratch as there are no continuing sale discussions, the publication added.
Elliott Management, the company's biggest shareholder, has been trying to push Arconic for a sale. CNBC's David Faber recently said Elliott was not considering a proxy fight against Arconic, but remains focused on getting the company to reengage in buyout talks. Investors are imploring Arconic to reengage in deal talks, but efforts to revive a deal are seen as tough, Faber said on January 24. However, the New York Post said Elliott Management is "likely" to wage a proxy fight to shake up Arconic's board, as the fund believes the company's decision to reject Apollo's (APO) bid partly because it didn't adequately cover the company's pension obligations.
PRICE ACTION: In morning trading, shares of Arconic are down 3%, or 57c, to $17.11.