Kennametal To Buy Allegheny's Tungsten Materials Business For $605 Mln

(RTTNews) - Industrial technology company Kennametal, Inc. (KMT) agreed Monday to acquire the Tungsten materials business of Allegheny Technologies, Inc. (ATI) for $605 million. The deal, which has the approval of both the companies' boards, is expected to close during the fourth quarter of 2013.

"ATI's Tungsten Materials Business brings vital strategic assets that are an excellent complement to Kennametal, especially given our common focus on operational excellence and industry-leading material science," Kennametal Chairman, President and CEO Carlos Cardoso sad in a statement.

The Tungsten materials business, part of ATI's Engineered Products segment, is a producer of tungsten metallurgical powders, as well as tooling technologies and components, generating annual sales of around $340 million and operating profit of $37 million. It comprises two divisions such as ATI Firth Sterling and ATI Stellram.

Kennametal plans to fund the acquisition through a combination of cash on hand and available borrowings under its existing revolving credit facility.

The acquisition is in line with Kennametal's long-term growth strategy of expanding presence in aerospace and energy end markets as well as further boosting its tooling portfolio. It also accelerates plans for expanding capacity and developing an advanced tungsten carbide recycling facility in the U.S. to serve global markets.

The deal is estimated to reduce planned capital expenditures by an estimated $30 million to $35 million. Kennametal also projects the deal to generate cost synergies of $30 million to $40 million on annual basis and cash tax benefits of between $60 million and $70 million.

Further, Kennametal expects the acquisition to be neutral to earnings for the remainder of its fiscal year 2014.

"The sale of our tungsten materials business to Kennametal, a recognized global leader in tungsten-based wear-resistant products, provides ATI with increased financial flexibility and simplifies capital allocation and deployment," ATI Chairman, President and CEO Rich Harshman stated.

Meanwhile, ATI said it will report the financial results of the tungsten materials business in discontinued operations pending completion of the transaction.

ATI noted that the sale strengthens its focus on core strategic businesses and emphasizes the technical, commercial and operating synergies between its High Performance Metals and Flat-Rolled Products segment businesses.

In Monday's regular trading session, KMT is currently trading at $46.71, up $0.71 or 1.54% on a volume of 0.29 million shares, and ATI is trading at $30.76, up $2.13 or 7.44% on a volume of 2.12 million shares.