Alcoa Inc. (AA), the largest U.S. aluminum producer, clamed it will pay $2.35 billion in cash and $500 million in stock for Firth Rixson, which is own
27 June 2014, 15:03
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The acquisition
is motivated by company's plans to expand further into downstream
manufacturing while closing unprofitable smelters amid a global
oversupply of raw aluminum. Alcoa is expanding a Virginia plant that
makes components for jet engines and is spending $190 million to build a
new engine-parts factory and aerospace-alloys plant in Indiana.
Firth Rixson, which is based in Sheffield, makes nickel-based superalloys and titanium seamless rolled rings for jet engines and products for the oil and gas industry and manufacturers of gas turbines.
Alcoa said Firth Rixson’s sales are expected to grow 60 percent in the next three years to $1.6 billion.
A bridge facility from Morgan Stanley will help to fund the deal. Alcoa plans to issue a combination of debt and equity. The acquisition, which also includes a further $150 million potential “earn-out” payable by Alcoa, is expected to close by the end of this year.
Alcoa’s financial advisers on the deal are Greenhill & Co. and Morgan Stanley while its legal adviser is Wachtell, Lipton, Rosen & Katz. Citigroup Inc. and Lazard Ltd. are financial advisers to Firth Rixson and Paul, Weiss, Rifkind, Wharton & Garrison LLP is its legal adviser.
According to Klaus Kleinfeld, Alcoa’s chairman and chief executive officer, the deal will contribute to his company’s earnings in its first year.
In April, Alcoa forecast global aluminum demand will exceed output this year, predicting an end to the almost decade-long glut of the lightweight metal. Alcoa raised its 2014 forecast for growth in aluminum sales in the aerospace industry to as much as 9 percent, citing demand for large commercial aircraft and regional jets.
While the price of aluminum has climbed 7.1 percent in the past year, Alcoa’s shares have risen 93 percent. The stock gained 2.7 percent to $14.94 at the close in New York.
Firth Rixson was acquired by Oak Hill and Neuberger Berman Group LLC from Lehman Brothers Holdings Inc. and Carlyle Group LP for 945 million pounds in 2007.
Firth Rixson, which is based in Sheffield, makes nickel-based superalloys and titanium seamless rolled rings for jet engines and products for the oil and gas industry and manufacturers of gas turbines.
Alcoa said Firth Rixson’s sales are expected to grow 60 percent in the next three years to $1.6 billion.
A bridge facility from Morgan Stanley will help to fund the deal. Alcoa plans to issue a combination of debt and equity. The acquisition, which also includes a further $150 million potential “earn-out” payable by Alcoa, is expected to close by the end of this year.
Alcoa’s financial advisers on the deal are Greenhill & Co. and Morgan Stanley while its legal adviser is Wachtell, Lipton, Rosen & Katz. Citigroup Inc. and Lazard Ltd. are financial advisers to Firth Rixson and Paul, Weiss, Rifkind, Wharton & Garrison LLP is its legal adviser.
According to Klaus Kleinfeld, Alcoa’s chairman and chief executive officer, the deal will contribute to his company’s earnings in its first year.
In April, Alcoa forecast global aluminum demand will exceed output this year, predicting an end to the almost decade-long glut of the lightweight metal. Alcoa raised its 2014 forecast for growth in aluminum sales in the aerospace industry to as much as 9 percent, citing demand for large commercial aircraft and regional jets.
While the price of aluminum has climbed 7.1 percent in the past year, Alcoa’s shares have risen 93 percent. The stock gained 2.7 percent to $14.94 at the close in New York.
Firth Rixson was acquired by Oak Hill and Neuberger Berman Group LLC from Lehman Brothers Holdings Inc. and Carlyle Group LP for 945 million pounds in 2007.
