Alcoa Inc.’s share price up, agrees to acqure Firth Rixson Ltd for $2.85billion

Alcoa Inc., the biggest aluminium manufacturer in the U.S., made a statement revealing that it reached an agreement over the acquisition of Firth Rixson Ltd, a UK-based aerospace-components producer. The cash-and-stock deal is estimated to about 2.85 billion dollars.

“This falls right into our strategy of building Alcoa out into a lightweight metals innovation powerhouse,” Klaus Kleinfeld, Chief Executive Officer of Alcoa Inc., was cited by the Financial Times as saying. “Our transformation continues and the transaction today adds to it.”

According to Alcoa Inc.s statement, the company is to take over the U.K. aerospace-components maker that currently belongs to the private-equity firm Oak Hill Capital Partners LP, for $2.35 billion in cash and 500 million dollars in stock. In addition, about 150 additional million dollars were agreed to be paid by Alcoa taking into account the forecast of the U.K.s performance through 2020.

As explained by Mr Kleinfeld, the U.S. company was “very excited” about acquiring Firth Rixson, considering the fact that the latter had recently made an investment in technology and equipment for isothermal welding of components.

The acquisition of Firth Rixson Ltd is considered a large step of Alcoa Inc. toward narrowing its dependence on low-margin basic materials. The takeover also provides the company with the opportunity to reach further expansion into downstream manufacturing. The deal is expected to expand the aerospace-related share of Alcoas sales to 20%, from 17% at the moment, the Wall Street Journal reported.

“Alcoa’s strong aerospace positioning is underappreciated. We therefore view this transaction as both highly accretive as well as helping to raise Alcoa’s aerospace profile,” Josh Sullivan, analyst at Sterne Agee & Leach Inc., commented the acquisition in a note, cited by Bloomberg.

Alcoa Inc. was 2.68% up to close at $14.94 per share yesterday, marking a one-year change of +92.77%. According to information published on CNN Money, the 17 analysts offering 12-month price forecasts for Alcoa Inc. have a median target of $13.50, with a high estimate of $17.00 and a low estimate of $8.00. The median estimate represents a -9.64% decrease from the last price of $14.94.