$1.5-billion takeover adds value with materials, production capabilities, and new process technologies
- All-stock transaction to close in Q2
- "… innovators in materials science and process technology"
- Ti melting, casting … through to machining
Aerospace OEMs and Tier suppliers' demand for titanium mill products is forecast to rise 5-6% annually through 2020, a detail that Alcoa indicated would enhance the long-term value of increasing its titanium production capabilities through the RTI International operations.
Alcoa has a definitive agreement to acquire RTI International Metals in a $1.5-billion, all-stock deal that would continue its aggressive expansion into commercial and defense aerospace markets. Directors of both firms have approved the takeover, and Alcoa expects to complete the purchase by mid-year, pending approval by regulators and RTI shareholders.
The buyer’s primary goal is to “grow its value-add businesses and further strengthen its aerospace portfolio,” according to its announcement. With its titanium refining and melting capacity RTI will support numerous Alcoa product offerings, and its various processing capabilities (forging, hot rolling) will complement Alcoa’s material and process technology offerings.
“We are combining two innovators in materials science and process technology,” explained Klaus Kleinfeld, Alcoa chairman and CEO. “RTI expands our aerospace portfolio market reach and positions us to capture future growth to deliver compelling value for customers, shareholders and employees.”
Over the past two years Alcoa has paid billions to increase its footprint in the aerospace market, notably with its $2.85-billion purchase of Firth Rixson Ltd., a producer of closed-die and seamless ring forgings for aerospace products. Alcoa also started capital programs totaling more than $120 million to expand two aerospace casting operations. It also acquired Tital a privately held aluminum and titanium casting producer with plants in Germany and China.
Aerospace is not the only target for Pittsburgh-based RTI International Metals. It produces titanium and titanium fabricated and mill products used in commercial aerospace, defense, propulsion, medical device, energy, industrial and chemical markets. The expansion it completed two years ago at Danville, VA, was defined as new “aerospace forging” capacity, and like Alcoa it maintains long-term supply contract with major aerospace OEMs.
Alcoa emphasized that purchases of titanium aerospace mill products is forecast to rise 5% annually through 2020, paced by new commercial aircraft programs.
RTI is an integrated titanium manufacturer, with operations spanning melting, casting, bloom, billet, plate, and sheet production, extrusion (for aerospace and oil-and-gas applications), high-speed machining, and production of integrated subassemblies for aerospace.
“These capabilities complement Alcoa’s titanium investment casting and forging capabilities,” the buyer noted, “and will enable a value-creating closed titanium scrap loop.”
Also, RTI will expand Alcoa’s advanced manufacturing and materials technologies, with capabilities like high-speed machining, forming, extruding and assembly for large, complex aerospace components.
Titanium powder metallurgy and processing technology will add production for near-net-shape aerospace components, medical devices, and parts for oil-and-gas production.
In addition, RTI will expand Alcoa’s additive manufacturing capabilities (e.g., 3D printing) for titanium, specialty metals, and plastic parts for aerospace, medical, and energy markets.
Finally, RTI will expand Alcoa’s capabilities in advanced materials, like titanium-aluminides, which are used to manufacture an emerging class of lightweight, high-volume jet engine parts.