High performance metals producer Alcoa [AA] on Monday said it has agreed to acquire RTI International Metals [RTI] in a $1.5 billion deal that will expand its titanium and value-added solutions used by the aerospace industry.
The $1.5 billion enterprise value of the pending acquisition, which is expected to close in three to six months subject to regulator and RTI shareholder approvals, includes $1.3 billion in new stock issuance, $330 million in cash on hand at RTI, and $517 million in debt.
Alcoa said that its 2014 aerospace sales would have increased 13 percent to $5.6 billion if it owned RTI. The company also said it expects the deal to be neutral to its earnings in the second year and accretive thereafter. Alcoa projects $100 million synergies by 2019 from productivity enhancements, procurement savings, overhead reductions, and growth.
RTI, which had $794 million in revenue last year, generates 80 percent of its business from aerospace and defense markets. The aerospace market is growing between 5 and 6 percent annually, Alcoa said.
In 2019 RTI is expected to have $1.2 billion in sales. The company is based in Pittsburgh, Pa.
The company did about 55 percent of its business within its Advanced Technologies Segment that provides flight critical subassemblies, near net shape airframe, long-length thin-wall extrusions, other capabilities, and the rest of the sales were from its Titanium segment. Titanium is the world’s fasted growing aerospace metal, Alcoa said, driven by increased use of the metal in newer commercial aircraft.
“We are combining two innovators in materials science and process technology, shifting Alcoa’s transformation into a higher gear,” Klaus Kleinfeld, chairman and CEO of Alcoa, said in a statement. “RTI expands our aerospace portfolio market reach and positions us to capture future growth to deliver compelling value for customers, shareholders and employees.”
RTI’s financial adviser on the deal is Barclays and Alcoa is being advised by Greenhill & Co. and Morgan Stanley.