Alcoa Inc. will pay $2.85 billion to buy Firth Rixson Ltd., a chain of 12 closed-die forging and ring-rolling operations in Europe, the U.S., and China, significantly expanding its presence in the precision aerospace parts market. The seller, Oak Hill Partners, will receive $2.35 billion in cash and $500 million worth of Alcoa stock.
The seller, Oak Hill Capital Partners, bought the global forging organization from The Carlyle Group L.P. in 2010 for an estimated $2 billion.
Directors of both companies already have approved the transaction. Alcoa expects to complete the purchase by the end of this year, pending several regulatory clearances.
For Alcoa, Firth Rixson adds some additional forging capabilities — currently it mainly produces closed-die forgings for aerospace structures and commercial vehicle wheels — but more important is that the acquisition emphasizes Alcoa’s intention to expand as a manufacturer of precision parts for aerospace programs. In recent weeks, Alcoa has commited $125 million to expand investment casting capacity for turbofan jet engine production. Late last year it sealed a long-term agreement to supply aluminum and titanium forgings to Airbus SAS for its production programs.
“The acquisition of Firth Rixson is a major milestone in Alcoa’s transformation,” stated chairman and CEO Klaus Kleinfeld. “This transaction will bring together some of the greatest innovators in jet engine component technology; it will significantly expand our market leadership and growth potential.
Firth Rixson consists of three operating divisions, producing rolled rings (seven plants), closed-die forgings, and specialty metals. Aerospace applications dominate its list of products, but it also supplies manufacturers of equipment and systems for power generation, oil and gas, defense, transportation, and other markets.
Firth Rixson has five operations in the U.S.: Firth Rixson Monroe, Rochester, NY (contoured and rectangular seamless rolled rings); Firth Rixson Forged Metals, Fontana, CA (closed die forgings and seamless rings); Firth Rixson Schlosser, Rancho Cucamonga, CA (seamless rings); Firth Rixson Viking, Reno, NV (contoured titanium structural and case rings); and Firth Rixson Georgia, Midway, GA (nickel- and titanium-alloy discs.)
Isothermal forging is a process in which dies are heated to the same temperature as the part to being forged, ensuring that the forming process is controlled and even, maintaining desired microstructural qualities in the finished component. As explained by Alcoa, isothermally forged parts are in demand for jet engines that use elevated turbine temperatures to maximize power output, conserve fuel, and reduce emissions.
Other Firth Rixson operations are in England (four plants), China, Czech Republic, and Hungary. Alcoa noted that Firth Rixson is among the world’s largest producers of in seamless rolled rings in Ni-based superalloys and titanium for jet engine manufacturing, as well as forgings for jet engines.
In 2013, Firth Rixson announced a long-term agreement (2015-2022) estimated at $500 million to supply seamless rolled rings for various Rolls-Royce plc jet engine programs.
“Firth Rixson increases the earnings power and broadens the market reach of our high-value aerospace portfolio and will deliver compelling and sustainable value for customers and shareholders,” according to Klaus Kleinfeld.
Alcoa predicts the purchase will strengthen its commercial aerospace revenues, forecasting 7% compounded annual growth in that market through 2019.