) is again active on the acquisition front having signed an
agreement to acquire
Allegheny Technologies Incorporated
) Tungsten Materials Business. The transaction, subject to
regulatory approvals, is expected to be complete by the end of
calendar year 2013.
ALLEGHENY TECH (ATI): Free Stock Analysis
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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
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
Earlier to this announcement, Kennametal had acquired Emura that
enables the company to diversify and balance its tungsten
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
), each with a Zacks Rank #2 (Buy).