Precision Castparts [PCP] last week said it entered into a definitive agreement to acquire Titanium Metals Corporation [TIE] for $16.50 per share in cash.
The transaction values Titanium Metals Corporation (Timet) at a total enterprise value of approximately $2.9 billion, including net cash and equivalents.
The acquisition of Timet is expected to be immediately accretive to earnings. Subject to the satisfaction or waiver of certain conditions, the tender offer is expected to be completed by the end of calendar year 2012, after which Timet’s results will be reported as part of PCC’s Forged Products segment.
“Timet will provide us with the titanium capability that has always been a key missing piece of our overall product portfolio,” said Mark Donegan, chairman and CEO of Precision Castparts Corp. (PCC). “As our 2006 acquisition of Special Metals did for us with nickel alloys, acquiring Timet will enable us to streamline our supply chain and better manage our input costs in our core operations. As we continue to grow in the aerostructure market, this supply linkage will present even more of an opportunity.”
In 2011, more than 75 percent of Timet’s sales were to aerospace and defense end markets, with PCC representing more than 15 percent of total sales, the company said.
Also, Donegan said, “The potential for value creation is vast–we expect to generate significant synergies by putting our two companies together and leveraging our respective strengths. Timet’s melting expertise and PCC’s forging and conversion assets are a complementary strategic fit. We will attack our collective cost structure and leverage our combined conversion assets to further enhance our respective customer presences and to penetrate new markets.
Once the merger is complete, Donegan said integration is expected to move quickly since PCP has worked with Timet for many years, and are familiar with its operations. “This transaction is truly a needle mover, a deal that offers PCC and our customers a wide range of opportunities going forward,” Donegan concluded.
Timet’s Board of Directors unanimously approved the transaction, following the following the unanimous recommendation of a special committee of independent directors and the PCC Board of Directors.
Timet’s Board will recommend that all stockholders tender their shares in the offer, and entities affiliated with Contran Corp. have agreed, subject to the terms of a support agreement, to tender shares representing approximately 45 percent of the total outstanding shares in the offer.
PCC has secured a fully underwritten $3.0 billion bridge financing commitment that may be used to complete this acquisition.
The acquisition will ultimately be funded through a combination of cash on hand, commercial paper, bank debt, and proceeds from the sale of notes and bonds. The transaction is not conditioned upon PCC obtaining financing.
Under the terms of the merger agreement, PCC will commence a cash tender offer by Nov. 20 to acquire all outstanding shares of Timet for $16.50 per share, net to the tendering holder in cash.