Alcoa agrees to buy Firth Rixson for $2.85 billion

Alcoa has agreed to acquire UK aerospace components maker Firth Rixson for $2.85 billion, in stock and cash, as the largest US aluminium producer forays into downstream manufacturing, the company said yesterday.

The purchase would see Alcoa pay $2.35 billion in cash and $500 million in stock for Firth Rixson, owned by private equity firm Oak Hill Capital Partners.

Morgan Stanley would help the deal by extending a bridge facility.

The aluminium producer planned to issue a combination of debt and equity and the deal is expected to close by the end of this year.

The company's downstream businesses serve aerospace customers as also car makers and the construction industry. Alcoa has been investing in those operations even as it shutters unprofitable smelters against the backdrop of a glut in raw aluminium output.

Firth Rixson produces seamless rolled rings for jet engines from nickel-based superalloys and titanium, which find application in the oil industry and makers of gas turbines.

According to Alcoa, the company's sales were expected to increase 60 per cent in the next three years to $1.6 billion.

Klaus Kleinfeld, Alcoa's chairman and chief executive, said the deal flew right into the sweet spot of his company's profitability, according to Bloomberg.

The deal is projected to add 20 per cent by way of annual sales at Alcoa's aerospace unit, the company's biggest so-called value-added business, supplementing its traditional metals operations, The New York Times reported.

The transaction would close by the end of the year.