Alcoa, Pittsburgh, announces that it has completed the acquisition of Firth Rixson, a global leader in aerospace jet engine components. Accelerating Alcoa’s transformation to a multi-material enterprise, the acquisition increases its offerings made of nickel-base superalloys, titanium, stainless steel, and advanced aluminum alloys, all produced by the most advanced isothermal forging technology and ring production capabilities.
Firth Rixson strengthens Alcoa’s robust aerospace portfolio and positions the company to capture greater profitable growth from its expanding value-added business. The transaction doubles Alcoa’s average revenue content on high-growth engine programs.
The company closed the transaction, which was announced in June, after receiving all of the required global regulatory approvals, and arranging financing for the deal.
With this acquisition, Alcoa’s revenues are expected to increase by $1.6 billion with an additional $350 million EBITDA in 2016, and to increase by $2 billion in revenues by 2019. Approximately 70% of this growth is secured by long-term agreements.
A majority of these new revenue streams come from aerospace sales, enabling Alcoa to further capitalize on strong growth in the commercial aerospace sector. Alcoa projects a compounded annual commercial jet growth rate of 7% through 2019, and sees a current 9-year production order book at 2013 delivery rates.
Alcoa is implementing a robust integration plan to realize significant synergy cost savings, primarily driven by purchasing and productivity improvements, optimizing internal metal supply, and leveraging Alcoa’s global shared services. These cost savings are expected to reach approximately $100 million annually by year five. The transaction is expected to be neutral to earnings the first year and accretive thereafter, and will generate a return in excess of cost of capital. Firth Rixson’s businesses will be integrated into Alcoa’s Engineered Products and Solutions (EPS) segment.
