Alcoa has signed a definitive agreement to acquire RTI International Metals, Inc., a global supplier of titanium and specialty metal products and services for the commercial aerospace, defense, energy and medical device markets.
Alcoa will purchase RTI in a stock-for-stock transaction with an enterprise value of $1.5 billion. RTI will expand Alcoa’s range of titanium offerings and add advanced technologies and materials.
Under the terms of the agreement, Alcoa will acquire all outstanding shares of RTI in a stock-for-stock transaction. RTI shareholders will receive 2.8315 Alcoa shares for each RTI share, representing a value of $41 per RTI share based on Alcoa’s closing price on March 6, 2015. The transaction has an enterprise value of $1.5 billion, including $330 million of RTI cash on hand and up to $517 million in RTI’s convertible notes.
The acquisition will offer Alcoa financial benefits with realized net synergies of about $100 million in 2019, primarily driven by procurement and productivity improvements, leveraging Alcoa’s global shared services and driving profitable growth. Alcoa expects RTI to contribute $1.2 billion in revenues in 2019, up from $794 million generated in 2014, with 65 percent of revenues supported by contracts over the next five years. RTI is expected to reach profitability of 25 percent EBITDA margin in 2019, up from 14.5 percent in 2014.
The transaction is expected to enable Alcoa to capitalize on strong growth in the commercial aerospace sector. Alcoa projects a compounded annual global aerospace market growth rate of five to six percent through 2019 and sees a current nine year production order book for commercial jets at 2014 delivery rates.
RTI grows Alcoa’s pro forma 2014 annual aerospace revenues by 13 percent, up from $5 billion to $5.6 billion. RTI is expected to increase Alcoa’s 2014 pro forma aerospace revenues to 37 percent of value-add sales, up from 35 percent. Alcoa’s aerospace business is the largest contributor to Alcoa’s value-add businesses.
Eighty percent of RTI’s revenues in 2014 were from the aerospace and defense industries, with the balance mainly split between other markets including energy and medical devices, complementing Alcoa’s growth markets.
Published in the April 2015 Edition of American Recycler News