Aluminum giant Alcoa (AA) agreed Thursday to buy British aerospace-components maker Firth Rixson Ltd, a global leader in aerospace jet engine components, in a cash and stock deal valued at $2.85 billion.
Alcoa will pay $2.35 billion in cash and $500 million in stock for Firth Rixson, which is owned by US-based private-equity firm Oak Hill Capital Partners LP. There may also be a payment of as much as $150 million based on Firth Rixson’s performance, the New York-based company said today in a statement.
“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,” said Alcoa CEO Klaus Kleinfeld. “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.”
Alcoa expects the acquisition to bolster annual revenue at Alcoa’s aerospace unit by 20 percent, to some $4.8 billion a year. Firth Rixson’s sales are also expected to grow by 60% in the next three years, from $1 billion in 2013 to $1.6 billion, and contribute $350 million EBITDA in 2016. Alcoa said it sees no impact on earnings in the first year, and gains in the second year.
“This flows right into the sweet spot of profitability,” Kleinfeld said to Bloomberg in a telephone interview today.
The deal is expected to close by the end of this year.
Following the news, shares of Alcoa were last trading up more than 3% at $14.98. Ticker has traded as high as $15.08 intraday.