Arconic to Sell Business Tied to London's Deadly Grenfell Blaze
(Bloomberg) -- Arconic Inc. is getting out of the business that came under scrutiny last year for its connection to a deadly apartment blaze in London.
The manufacturer put its Building and Construction Systems unit up for sale as part of a broad portfolio review that should be completed in the next few months, Arconic said Tuesday as it reported second-quarter earnings. The business has about $1 billion of annual sales.
The decision to back away from construction pushes Arconic further toward the growing aerospace market as new Chief Executive Officer Chip Blankenship tries to rejuvenate the company. The former General Electric Co. executive, who took the helm this year, has pledged to cut costs and reassess each business after acknowledging operational missteps.
Arconic rose 1.4 percent to $21.16 at 9:52 a.m. in New York. The shares fell 23 percent this year through Monday, making it the worst performer on a Standard & Poor’s index of 13 aerospace and defense stocks.
With a sale, Arconic will exit the building-materials business that drew unwanted attention last year. An Arconic product known as Reynobond PE was used in the cladding of London’s Grenfell Tower, an apartment high-rise that caught fire, killing more than 70 people. The company subsequently said it would stop selling the material for use in high-rises.
“This is a very well run business with strong markets and products,” Blankenship said on a conference call with analysts. Still, the company decided it “will not be a core emphasis for Arconic going forward.”
The fire was just one of a tumultuous series of events that Arconic has faced since its 2016 split from aluminum giant Alcoa Corp. Arconic also fought a proxy battle with activist investor Elliott Management Corp., its largest shareholder, which led to the departure of Klaus Kleinfeld as CEO last year.
The manufacturer became the subject of buyout speculation recently after a report that Apollo Global Management and other private equity firms were weighing an acquisition. Arconic hasn’t commented on the possibility.
Arconic’s adjusted profit rose to 37 cents a share in the second quarter, the company said in a statement. That beat the average 30 cents of analysts’ estimates compiled by Bloomberg. Sales rose 9.6 percent to $3.6 billion, slightly higher than the $3.49 billion estimate.
Blankenship said in the statement that he’s pleased with the results even though there’s still work to be done. The company “is delivering operational improvements where we need it the most.”
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