Alcoa has signed a deal to acquire Firth Rixson, an aerospace jet engine components manufacturer, from private investor Oak Hill Capital Partners in a $2.85bn deal.
The acquisition reinforces Alcoa’s position in the aerospace business, and allows the company to tap the jet engine components market.
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Alcoa chairman and CEO Klaus Kleinfeld said: "The acquisition of Firth Rixson is a major milestone in Alcoa’s transformation.
"This transaction will bring together some of the greatest innovators in jet engine component technology; it will significantly expand our market leadership and growth potential.
"Firth Rixson increases the earnings power and broadens the market reach of our high-value aerospace portfolio and will deliver compelling and sustainable value for customers and shareholders."
Under the terms of the deal, Alcoa will pay $2.35bn in cash, $500m in stock payment and around $150m based on Firth Rixson’s performance.
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By GlobalDataWith this acquisition, Alcoa expects a 20% growth in its aerospace revenues to around $4.8bn.
The company also expects cost savings, primarily driven by purchasing and productivity improvements, optimising internal metal supply and leveraging its global shared services.
To finance the transaction, Alcoa has secured interim financing from Morgan Stanley, and would issue a prudent combination of debt and equity-content securities.
Subject to customary conditions and regulatory approvals, the transaction is expected to close by the end of the year.
