Arconic Inc.: A Spin-Off of Its Global Rolled Products Business

Arconic Inc. was an international aluminum parts manufacturing and lightweight composite engineering conglomerate. In early 2019, it was set to be sold to Apollo Global Management Inc., a premier private equity firm; however, the deal fell apart due to a dispute over the valuation of pension obligations. The board of Arconic Inc. still demanded structural changes to maximize shareholder value, and in February 2020, the company engaged Bulge Bracket Bank (Bulge Bracket) to explore other options. The managing director of Bulge Bracket saw that there was a case to be made for spinning off Arconic Inc.’s Global Rolled Products division as a new company, to be called Arconic Corporation. He assigned a promising second-year analyst the task of conducting a comparable companies analysis to determine a fair valuation for Arconic Corporation. By drawing up a list of other companies in the materials industry and conducting a qualitative and quantitative analysis on them to identify comparable companies, the analyst was able to determine a reasonable implied valuation range ahead of the stock market listing of the spun-off company on April 1, 2020.

This case is suitable for undergraduate and graduate-level courses on corporate finance. This case focuses on the valuation of the proposed spin-off company, Arconic Corporation, using a comparable companies analysis. After working through the case and assignment questions, students should be able to do the following: <ul><li>Determine which companies are comparable, based on both quantitative and qualitative assessments.</li><li>Use publicly traded companies to estimate the valuation of a newly traded company.</li><li>Identify which multiples to use to determine valuation.</li></ul>

• valuation, spin-off