Kennametal to Buy Tungsten Biz of ATI - Analyst Blog
September 17 2013 - 3:00PM
Zacks
Kennametal Inc.
(KMT) is again active on the acquisition front having signed an
agreement to acquire Allegheny Technologies
Incorporated’s (ATI) Tungsten Materials Business. The
transaction, subject to regulatory approvals, is expected to be
complete by the end of calendar year 2013.
The acquisition has been valued at $605 million, which Kennametal
intends to pay using its available cash and borrowings under its
existing revolving credit facility.
Allegheny Technologies’ Tungsten Materials Business is among the
leading producer of tungsten metallurgical powders and also
provides tooling technologies and components. The business has two
divisions namely, ATI Firth Sterling and ATI Stellram.
Post the completion of the acquisition, the acquired business
brings with it roughly $340 million of annual revenue generation
capacity and 1,175 employees operating from 14 facilities
worldwide.
Kennametal has over time preferred accretive acquisitions and
dispositions of non-core assets as its primary tool to shift its
business portfolio toward favored growth markets. This current
acquisition also aligns with the company’s long-term growth
strategies and will enable diversification of product portfolio,
expansion in the aerospace and energy end markets and strengthening
of the tooling business.
Annual run-rate cost synergies within $30-$40 million range and
cash tax benefits within $60-$70 million range is expected to be
realized post the completion of the acquisition. Further, the
acquisition also accelerates Kennametal’s plan for an advanced
tungsten carbide facility. Further, the company has lowered its
capital spending plan from $65 million to $35 million. For the
fiscal year 2014, the acquisition is anticipated to be neutral to
earnings.
Earlier to this announcement, Kennametal had acquired Emura that
enables the company to diversify and balance its tungsten sourcing
capabilities.
Kennametal Inc. currently has a market capitalization of $3.6
billion. The stock carries a Zacks Rank #3 (Hold). Other stocks to
watch out for in the industry are Actuant
Corporation (ATU) and Sandvik AB (SDVKY),
each with a Zacks Rank #2 (Buy).
ALLEGHENY TECH (ATI): Free Stock Analysis Report
ACTUANT CORP (ATU): Free Stock Analysis Report
KENNAMETAL INC (KMT): Free Stock Analysis Report
SANDVIK AB (SDVKY): Get Free Report
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