Specialty metals maker
Allegheny Technologies Inc.
) has completed its earlier announced sale of its tungsten
materials business to Latrobe, PA-based wear-resistant products
) for $605 million. Shares of Allegheny moved up as much as
around 2% during the trading session following the declaration of
Allegheny decided to divest its tungsten materials business so
that it can focus more on its core businesses - High Performance
Metals and Flat-Rolled Products. The acquisition is also expected
to increase Allegheny's financial flexibility and simplify its
capital allocation and deployment.
Allegheny's tungsten materials business operates through
roughly 1,175 employees across 14 operating facilities globally
and consists of two market-leading divisions - ATI Firth Sterling
and ATI Stellram. It produces tungsten powder, tungsten heavy
alloys, tungsten carbide materials and carbide cutting tools. The
business unit generated $338.6 million of total net revenues and
$37.2 million of operating profit for the year ended Dec 31,
Kennametal paid for the acquisition partly by cash and partly
by available borrowings under its existing revolving credit
Allegheny's sole financial advisor and legal counselor for
this transaction were
The Goldman Sachs Group, Inc.
) and K&L Gates LLP, respectively. J.P. Morgan Securities
LLC, which operates as a subsidiary of
JPMorgan Chase & Co.
), acted as the financial advisor to Kennametal on the
Allegheny posted its third-quarter 2013 results on Oct 23. The
company reported loss from continuing operations of $28.4 million
(or 27 cents per share) compared with a profit of $31.3 million
(or 29 cents per share) recorded a year ago. After excluding a
loss of 4 cents per share due to the effects of income taxes
reported in domestic and foreign jurisdictions, loss from
continuing operations was 23 cents per share, narrower than the
Zacks Consensus Estimate loss of 28 cents.
Allegheny recorded a loss of 5 cents per share in the reported
quarter from discontinued operations that include the tungsten
materials business and the iron castings and fabricated
Revenues slipped 14% year over year to $972 million, missing
the Zacks Consensus Estimate of $1,051 million. Revenues were
hurt by lower demand across several end markets including oil and
gas, jet engine aftermarket, electrical energy, and construction
and mining. Allegheny also witnessed lower pricing for many of
its products and a decline in raw materials surcharges.
Allegheny expects business conditions to remain challenging
through the end of 2013 and potentially in 2014 due to the U.S.
debt ceiling and other fiscal policy issues.
Allegheny is primarily focusing on cost optimization and is
accelerating its cost reduction efforts. Allegheny, through this
move, was successful in gross cost reductions of $123.4 million
during the first nine months of 2013, a pace which is well ahead
of its 2013 target of $100 million in new cost reductions. The
company remains well positioned to align its production, and
inventory levels to match the demands of its customers and end
Allegheny currently holds a Zacks Rank #4 (Sell).
ALLEGHENY TECH (ATI): Free Stock Analysis
GOLDMAN SACHS (GS): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
KENNAMETAL INC (KMT): Free Stock Analysis
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