Alco, a leader in aerospace jet engine components, will purchase Firth Rixson from Oak Hill Capital Partners, for $2.85 billion in cash and stock and an additional $150 million potential earn-out. The buy of Firth Rixson increases Alcoa’s 2013 pro forma aerospace revenue by 20 percent to $4.8 billion and expands product suite in growing jet engine segment and is expected to contribute incremental $1.6 billion revenues and $350 million EBITDA in 2016.
“The acquisition of Firth Rixson is a major milestone in Alcoa’s transformation,” said Klaus Kleinfeld, Alcoa Chairman and Chief Executive Officer. “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.”
Firth Rixson provides rings, forgings and metal products to the aerospace sector and other industries requiring highly engineered material applications. It is the world’s largest supplier of seamless rings for aero-engines and leads the way in conventionally and isothermally forged engine disc technology. The company’s integrated extrusion and closed die forging operation serves the jet engine, landing gear system, mining and oilfield component markets, and its specialized cast and wrought superalloy material operation supplies a multitude of high technology markets. Approximately 75 percent of Firth Rixson’s revenues in 2013 were from the aerospace industry, with the balance split between other markets such as industrial gas turbine, commercial transportation and oil and gas, complementing Alcoa’s growth markets. The company has 13 operating facilities in the US, UK, Europe and Asia. Firth Rixson is based in Sheffield, UK (firthrixson.com).
The acquisition strengthens Alcoa’s robust aerospace business. It positions the company to capture additional aerospace growth with a broader range of high-growth, value-add jet engine components. The acquisition is strategically aligned with the company’s objective to continue to build its value-add businesses.
“We at Oak Hill Capital have worked closely with the Firth Rixson team, led by CEO David Mortimer, to create long-term strategic value,” said Denis Nayden, Managing Partner of Oak Hill Capital. “By investing in new capabilities and technology in partnership with the leading aerospace engine customers, we strengthened Firth Rixson’s global leadership and built a business with strong growth, a large backlog of booked business and significant further potential. 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.”
Oak Hill Capital Partners has $8 billion of committed capital and invests in the following six sectors: basic industries; business and financial services; consumer, retail & distribution; healthcare; media & telecom; and technology. Over the past 25 years, the professionals at Oak Hill and its predecessors have invested in more than 70 private equity transactions. The firm is located in Stamford, CT (www.oakhillcapital.com).
Alcoa is a leader in lightweight metals engineering and manufacturing. The company’s products are used in automotive and commercial transport to air and space travel, and improve industrial and consumer electronics products. Products are made of titanium, nickel and aluminum, and best-in-class bauxite, alumina and primary aluminum products. The company was founded over 125 years ago, and today, employs 60,000 people in 30 countries. The company is based in New York (www.alcoa.com).
The transaction, which has been approved by the Boards of Directors of both companies, remains subject to customary conditions and receipt of regulatory approvals. Alcoa expects to obtain all required regulatory clearances and close the transaction by the end of 2014.
The acquisition will be supported by a fully committed bridge facility from Morgan Stanley. Alcoa will subsequently issue a combination of debt and equity-content securities and remains committed to maintaining its investment grade rating.
Greenhill and Morgan Stanley acted as financial advisors to Alcoa and Wachtell, Lipton, Rosen & Katz acted as legal advisor. Citigroup and Lazard acted as financial advisors to Firth Rixson and Paul, Weiss, Rifkind, Wharton & Garrison acted as legal advisor.
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