Takeaways From a $15 Billion Buyout Bust
Apollo’s failure to clinch a deal for Arconic raises questions about its reported interest in GE's jet-leasing unit, plus more industrial insights.
Apollo and Arconic called it quits, but what about Apollo and GE?
Photographer: Luke Sharrett/BloombergArconic Inc.’s failure to sell itself after months of negotiations doesn’t bode well for a sale of General Electric Co.’s jet-leasing unit. The alleged buyer in both of those situations is Apollo Global Management. In the case of Arconic, the private equity firm beat out a rival consortium only to see its $15 billion bid for the metal-parts manufacturer fail at the one-yard line. Apollo has also reportedly been talking to banks about a purchase of all or part of GE Capital Aviation Services, or GECAS.
Personally, I think Apollo dodged a bullet when the Arconic deal fell through; loading up a cyclical company with debt just as the economy appears to be cooling seems like a questionable strategy. But according to the Financial Times, the Arconic deal fell apart because the board felt Apollo wasn’t committing enough funding for the company’s pension liabilities and was concerned that the added leverage from a buyout would raise red flags with pension regulators. The two sides had reportedly reached an agreement for handling potential liabilities related to London’s Grenfell Tower fire, whose rapid spread was blamed on Arconic-made combustible cladding. A GECAS deal and an Arconic buyout are apples and oranges, but I think it’s fair to point out that the former would require meaningfully higher capital commitments and entail a higher degree of risk.