Arconic is sleeping with the enemy. Elliott Management has 3 members on the board and is pushing for a sale.
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ARNC - Arconic Inc - Company Profile
Arconic creates breakthrough products that shape industries. Working in close partnership with our customers, we solve complex engineering challenges to transform the way we fly, drive, build and power. Through the ingenuity of our people and cutting-edge advanced manufacturing techniques, we deliver these products at a quality and efficiency that ensure customer success and shareholder value. Company information from Arconic.
Earnings January 22nd.
Arconic was the original Alcoa. They spun off the aluminum business then changed their name to Arconic. This company makes precision aluminum parts for aircraft and transportation equipment. Eliott management has been agitating for change and managed to get the long term CEO Klaus Kleinfeld kicked out and oversaw the five-month process to get 24-year GE veteran Charles Blankenship installed as the new CEO.
Elliott has seen their investment lag for the last year as the spinoff and CEO hunt took the wind out of Arconic's sales. Now they could be reaching the end of their struggle with a potential buyout on the horizon.
One analyst got the fire started a couple weeks ago when he suggested Honeywell was on the prowl and would eventually buy Arconic. Honeywell lost out on Rockwell Collins (COL) when United Technologies bought them for $30 billion or 14 times EBITDA.
Honeywell was under pressure by Dan Loeb to spin off its aerospace unit. Instead, they agreed to spin off the homes and global distributions unit and the transportation business leaving (by the end of 2018) the aerospace unit intact and the surviving business. Now Honeywell needs to bulk up its aerospace business or they will be the next company acquired.
With Dan Loeb on one side urging Honeywell to build aerospace and Elliott Management on the other side urging Arconic to sell itself, this is a match made in heaven and could happen in early 2018 according to the analyst.
Shares have sprinted higher since the news story broke a couple weeks ago. They are very close to a 52-week high over $28 and a move over that level could trigger additional buying and short covering.
I am using a July option to get well past the January and April earnings. We will not hold it that long but the uncertainty surrounding those events should keep the premium up if we have a market drop in January.
Buy July $30 call, currently $1.50, initial stop loss $25.
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