A shareholder of Arconic Corp. has filed a lawsuit against the Pittsburgh-based provider of aluminum sheet, plate and extrusions, alleging that it undervalued its share price and misled investors during Apollo Global Management’s $5.2 billion takeover in May 2023. The transaction is expected to close in the second half of 2023.
The shareholder, Robert Garfield, claims in the suit filed in Pennsylvania state court on June 23, 2023, that the deal only paid $30 per share, which is “inadequate.” In fact, Arconic’s own financial advisors, Goldman Sachs and Evercore Group, determined that the shares should be as much as $39 per share.
As a result, Garfield argues that “Arconic’s investors will receive over 23% less for their shares than the shares’ intrinsic value and will be deprived of over half billion dollars in value collectively.”
Garfield claims that Arconic accepted the bid to go private to enrich the company’s executives. He states in the complaint that Arconic CEO Timothy Myers will receive a payout of more than $28.2 million, become a highly compensated employee and have an ownership interest that enables him to future profits. In comparison, other investors will no longer have equity interests in the company once it goes private.
Garfield contends that the buyout is further tainted by Arconic’s engagement with Goldman Sachs and Evercore. He accuses the financial advisors of a conflict of interest because they have “deeply entrenched and highly lucrative business dealings with counterparty Apollo.”
“In fact, Goldman Sachs was working for Apollo at the same time it was advising [Arconic] on the buyout from Apollo,” argues Garfield.
He says that Goldman Sachs and Evercore received fees of around $100 and $117 million, respectively, from Apollo. As part of the acquisition, Goldman Sachs will receive as much as $31.1 million if the buyout closes and $2.5 million if it does not. Evercore will receive as much as $20.6 million if the buyout closes and just $2.5 million if it does not.
Garfield also argues that during the proposed acquisition, Arconic executives filed a proxy statement with U.S. Securities and Exchange Commission encouraging investors to vote for the Apollo takeover. The proxy, however, contained false statements about the potential conflicts of interest between Arconic executives and their financial advisors, the buyout price, business prospects and key financial metrics.