Alcoa buys British jet engine parts maker for $2.85 billion

WASHINGTON: US aluminum giant Alcoa is expanding its aerospace business with the $2.85 billion cash-and-stock acquisition of Firth Rixson, a leading British manufacturer of jet engine components.
Alcoa said it had signed a definitive agreement to buy Firth Rixson from Oak Hill Capital Partners, a US-based private equity firm.
Alcoa will pay $2.35 billion in cash and $500 million in common stock for Firth Rixson. It will add $150 million to the deal if the company meets certain performance targets. The Sheffield, England-based company has operations in Britain, the US, Europe and Asia.
“The acquisition of Firth Rixson is a major milestone in Alcoa’s transformation,” said Klaus Kleinfeld, Alcoa chairman and chief executive, 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.”
Alcoa said it expected the acquisition to contribute $1.6 billion in revenue and $350 million in operating profit in 2016.
Investors in Alcoa welcomed the news, pushing Alcoa shares up 2.4 percent to $14.90 in late-morning trade.
Firth Rixson had $1 billion in revenue in 2013, about 75 percent of it from the aerospace industry. Alcoa said the British firm’s sales were expected to grow 12 percent annually through 2019, a pace more than double the expanding global aerospace market.
The takeover was expected to reap cost savings above $100 million annually by its fifth year.