Alcoa to acquire RTI International Metals

New York and Pittsburgh – Alcoa officials have signed a definitive agreement to acquire RTI International Metals Inc., a global supplier of titanium and specialty metal products and services for the commercial aerospace, defense, energy, and medical device markets. Alcoa will purchase RTI in a stock-for-stock transaction with an enterprise value of $1.5 billion.

 

With RTI, Alcoa will grow its value-add businesses and further strengthen its aerospace portfolio. RTI will expand Alcoa’s range of titanium offerings and add advanced technologies and materials. 

 

“Alcoa is accelerating its value-add growth engine by acquiring titanium leader RTI,” said Klaus Kleinfeld, Alcoa chairman and chief executive officer. “We are combining two innovators in materials science and process technology, shifting Alcoa’s transformation into a higher gear.”

 

“Innovation and scale are critical to winning in both the titanium and aerospace industries today, which is why this transaction is such a natural strategic fit for both RTI and Alcoa,” said Dawne Hickton, vice chair, president and chief executive officer of RTI International Metals. “We look forward to continuing to accelerate RTI’s success as a part of the Alcoa team.” 

 

Under the terms of the agreement, Alcoa will acquire all outstanding shares of RTI in a stock-for-stock transaction. The transaction has an enterprise value of $1.5 billion, including $330 million of RTI cash on hand and up to $517 million in RTI’s convertible notes. 

 

Alcoa expects RTI to contribute $1.2 billion in revenues in 2019, up from $794 million generated in 2014, with 65% of revenues supported by contracts over the next five years. RTI is expected to reach profitability of 25% EBITDA margin in 2019, up from 14.5% in 2014. 

 

Alcoa projects a compounded annual global aerospace market growth rate of 5% to 6% through 2019 and sees a current 9-year production order book for commercial jets at 2014 delivery rates.

 

RTI grows Alcoa’s pro forma 2014 annual aerospace revenues by 13%, up from $5 billion to $5.6 billion. RTI is expected to increase Alcoa’s 2014 pro forma aerospace revenues to 37% of value-add sales, up from 35%. Alcoa’s aerospace business is the largest contributor to Alcoa’s value-add businesses. 

 

Eighty percent of RTI’s revenues in 2014 were from the aerospace and defense industries, with the balance mainly split between other markets including energy and medical devices, complementing Alcoa’s growth markets. 

 

Spending on titanium aerospace mill products is expected to grow by about 5% annually over the next five years driven by high-growth, next-generation aircraft programs. RTI’s titanium operations span midstream processes such as melting, ingot casting, bloom, billet, plate and sheet production, and downstream extrusions, high speed machining, and production of integrated subassemblies, primarily for aerospace. These capabilities complement Alcoa’s titanium investment casting and forging capabilities, and will enable a value-creating closed titanium scrap loop. 

 

RTI will expand Alcoa’s advanced manufacturing and materials technologies. Its high-velocity machining, forming, extruding, and parts assembly operations will enable Alcoa to produce large, complex aerospace components. Advanced titanium powder metallurgy and processing technology will enable cost-effective production of near net-shape aerospace components. RTI will expand Alcoa’s additive manufacturing (3D printing) capabilities to produce titanium, specialty metals, and plastic parts. RTI also grows Alcoa’s portfolio of titanium-aluminides, increasingly used to manufacture lightweight, aerodynamic jet engine parts for high-volume, next-generation jet engines. 

 

The transaction, which has been approved by the Boards of Directors of both companies, remains subject to customary conditions and receipt of regulatory approvals and RTI shareholder approval.