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Kennametal to Acquire Allegheny's Tungsten Materials Business for $605 Million

By Tim Brugger - Sep 16, 2013 at 10:51AM

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Kennametal looks to expand in aerospace and energy markets.

In an effort to fast-track its growth strategy and diversify its aerospace, energy end market, and tooling portfolio, Kennametal (KMT -0.31%) has reached an agreement with Allegheny Technologies (ATI -0.38%) to acquire ATI's tungsten materials division for $605 million, Kennametal announced today.

The tungsten materials business generates approximately $340 million in annual sales, Kennametal said, and has about 1,175 employees located in 14 facilities around the world. The transaction accelerates Kennametal's plans for a tungsten carbide recycling plant in the U.S., and will reduce Kennametal's planned capital expenditures by $30 million to $35 million, the company said.

Kennametal will benefit from a significant step-up in tax basis, which will translate into a tax benefit equal to approximately $60 million to $70 million, according to the company. Synergies gained from the acquisition, according to Kennametal, will save as much as $30 million to $40 million in expenses annually. The company will utilize existing cash and draw on its credit facility to fund the deal.

The boards of directors of both Kennametal and ATI have unanimously agreed to the transaction. The deal is expected to close before the end of 2013, and is subject to customary closing conditions.

Allegheny said in its press release that the sale gives it better financial flexibility as Allegheny Technologies focuses on growth opportunities in its high-performance metals and flat-rolled products segments.

-- Material from The Associated Press was used in this report.


Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Kennametal. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Allegheny Technologies Incorporated Stock Quote
Allegheny Technologies Incorporated
$28.91 (-0.38%) $0.11
Kennametal Inc. Stock Quote
Kennametal Inc.
$25.96 (-0.31%) $0.08

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