US giant Alcoa buys UK’s Firth Rixson for $2.85bn

Alcoa will buy aerospace company Firth Rixson (Source: Getty Images)
Alcoa, the huge US based aluminium producer, has continued its diversification as it announced it will buy UK based aerospace company Firth Rixson from owners Oak Hill Capital Partners, in a deal worth $2.85bn (£1.67bn).
Firth Rixson, which is based in Sheffield but has facilities in the US, China and central Europe, manufactures aerospace parts including rolled engine rings for the hottest parts of jet engines. The aerospace sector accounted for 75 per cent of its revenues in 2013, but it is also involved in manufacturing parts for the gas, oil and mining industries.
Alcoa said it expected revenues at Firth Rixson to rise to $1.6bn in 2016, up from $1bn in 2013.
And Alcoa boss Klaus Kleinfeld said that the acquisition “is a major milestone in Alcoa’s transformation.”
The acquisition comes as Alcoa looks to shift its portfolio towards manufacturing for the aerospace and automotive industries, as the aluminium market has suffered for years from depressed prices due to an oversupply in the world market.
Earlier this year Alcoa closed smelting facilities in Australia due to tough conditions in the aluminium market, although it remains the third largest aluminium producer in the world.
Denis Nayden, managing partner at Oak Hill Capital said of the deal: “We are excited about the equity we are receiving in Alcoa and confident that the combination of Alcoa and Firth Rixson will achieve great success as a strategic supplier to the world’s best aerospace companies.”
The deal remains subject to regulatory approval, and is expected to be completed by the end of 2014.
Shares in Alcoa rose two per cent yesterday to close at $241.62.

THE DEAL IN DETAIL

  • Alcoa will pay $2.85bn, with $2.35bn in cash and $500m in company stock, and a potential $150m additional earn-out.
  • Firth Rixon’s sales expected to grow until 2019 at a rate more than double the global aerospace market.
  • Annual synergy cost savings expected to be more than $100m by year five.
  • Firth Rixon to grow Alcoa’s annual aerospace revenues by 20 per cent, from $4bn in 2013 to $4.8bn.
  • The deal is expected to increase the contribution of the high-growth aerospace segment to Alcoa’s value-add revenues from 30 per cent to nearly 35 per cent.

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