US metal manufacturer Alcoa is to pay $1.3bn (£860m) for RTI International Metals, in a stock-for-stock deal with an enterprise value of $1.5bn.
Alcoa, which is best known as an aluminium producer, said yesterday that the deal will boost its aerospace business.
RTI specialises in titanium and products and services for the commercial aerospace, defence, energy and medical device markets.
According to Alcoa, RTI will expand its range of titanium offerings and add advanced technologies and materials, “increasing the company’s position as a leading industrial innovator”.
Alcoa expects RTI to contribute $1.2bn in revenues in 2019, up from $794 m generated in 2014, with 65 per cent of revenues supported by contracts over the next five years. The deal brings Alcoa $330mi of RTI cash on hand and up to $517m in RTI’s convertible notes.
The transaction, which sees Alcoa pay $41 per RTI share, is expected to close in three to six months.
Klaus Kleinfeld, Alcoa’s chairman and chief executive, said the company was “accelerating its value-add growth engine” with the acquisition.
“We are combining two innovators in materials science and process technology, shifting Alcoa’s transformation into a higher gear,” he added. “Basically, we’ve become a titan in titanium.”
Dawne Hickton, RTI’s vice chair, president and chief executive, said the firm was pleased to have reached a deal that delivers “immediate value” to shareholders and appropriately reflects the strength of the business.
She added that the acquisition would help RTI “take its innovative technologies to the next level”.
“Innovation and scale are critical to winning in both the titanium and aerospace industries today, which is why this transaction is such a natural strategic fit for both RTI and Alcoa,” said Hickton.
Alcoa’s shares fell by 6.22 per cent on the Nasdaq yesterday, while RTI’s shot up by 31.38 per cent.