Arconic Plans to Divest Chinese Operations in $300 Million Deal

In a significant move within the aerospace industry, Arconic Corp is reportedly on the verge of selling its China business for an estimated $300 million. This decision reflects a growing trend among multinational firms reassessing their operations in China amidst various economic and geopolitical challenges.

Strategic Shift Amid Global Trends

Arconic, a major player in the supply of aluminum products for aerospace, automotive, and defense industries, is said to have engaged Goldman Sachs to manage the sale process. Sources, preferring anonymity due to the confidentiality of the matter, indicate that this move is a strategic attempt to streamline Arconic’s global operations. The company, now under Apollo Global Management's control, seems to be focusing on optimizing its assets and business strategy.

This development comes at a time when multinational corporations are increasingly reevaluating their presence in China. Factors such as slower economic growth, robust local competition, and geopolitical tensions have prompted a rethink of business strategies in the region. Data from Dealogic shows a trend of foreign companies divesting Chinese assets, with totals reaching $12.5 billion in 2023 and $13.1 billion the previous year.

The Implications for Arconic and Apollo

For Arconic, the sale of its China business, which operates two manufacturing sites in Qinhuangdao and Kunshan with approximately 860 employees, represents a strategic shift. The decision appears to be driven by the desire to focus on more lucrative aspects of its portfolio. The China operation, described as subscale compared to Arconic's global footprint, is seen as a logical choice for divestiture, especially since it does not hold sensitive intellectual property.

For Apollo Global Management, this move is likely geared towards maximizing Arconic's valuation in anticipation of a future exit. This strategic decision aligns with Apollo’s broader investment strategy, particularly after their acquisition of Arconic in a $5.2 billion deal that took the company private from Nasdaq.

A Look Back at Arconic’s History

Arconic’s journey, tracing back to the late 1880s with the founding of Alcoa, has seen several transformations. The most notable was in 2016, when it was spun off from Alcoa and later split into Arconic and Howmet Aerospace in 2020. This history of adaptation and evolution is a testament to the company’s ability to navigate changing market dynamics.