Kennametal Inc., Latrobe, Pa., has signed a definitive agreement to acquire the Tungsten Materials business of Allegheny Technologies Inc., Pittsburgh, for $605 million. With approximately $340 million in annual sales, the business is a leading producer of tungsten metallurgical powders, as well as tooling technologies and components. It consists of two market-leading divisions: ATI Firth Sterling and ATI Stellram.
The acquisition will advance Kennametal’s core strategy that seeks to diversify the company’s tungsten sourcing to balance supplies, costs, and access to raw materials, including those produced from recycled products. The ability of ATI’s Tungsten Materials business to produce critical materials from recovered tooling and scrap will enhance Kennametal’s material sourcing and development capabilities to support the company’s growth initiatives.
The acquisition accelerates Kennametal’s previously announced plans to expand capacity and develop an advanced tungsten carbide recycling facility in the United States to serve global markets. The company also estimates that this will reduce planned capital expenditures by approximately $30 million to $35 million and expects to achieve economy of scale six to eight years earlier than prior projections.
In addition, the acquisition will further augment Kennametal’s tooling portfolio in the areas of metal cutting and metal finishing technologies, through brands such as Stellram Products, Garryson Products, and Landis Products.
The acquisition is expected to generate significant synergies. The company forecasts potential annual run-rate cost synergies ranging from $30 million to $40 million, which it anticipates will be realized via productivity improvements, operational efficiencies, and raw-material cost benefits. Kennametal also plans to pursue revenue synergies by extending the sales of ATI’s Tungsten Materials Business globally through its existing sales channels, while building further on its strategic talent and technologies.
