Precision Castparts offers $2.9 billion for Titanium Metals

Fri Nov 9, 2012 8:31pm EST
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By A. Ananthalakshmi

(Reuters) - Precision Castparts Corp PCP.N offered $2.9 billion to acquire Titanium Metals Corp TIE.N, a leading maker of alloys used in jet engines and controlled by Texas billionaire Harold Simmons.

Precision Castparts, whose castings are used in every jet aircraft engine program in production or under development, said the acquisition of the titanium producer will help streamline its supply chain, reduce costs and boost earnings.

"(Titanium Metals) will provide us with the titanium capability that has always been a key missing piece of our overall product portfolio," Precision Castparts Chief Executive Mark Donegan said in a statement.

The company offered $16.50 per share for Titanium Metals, a 43 percent premium to the stock's closing price on Friday of $11.57.

Simmons' Contran Corp and affiliates, which hold about 45 percent of Titanium Metals, have agreed to support the deal.

Since Precision Castparts was Titanium's biggest customer, the cost reductions from the deal should be significant, analysts said. It also gives the buyer much greater exposure to titanium sales. And Precision Castparts has shown an ability to integrate acquisitions smoothly.

"If PCP is able to extract the value out of this, then in the long run, like you've seen with other acquisitions it's made, I think you can argue it will end up being a good deal," Ken Herbert, an analyst with Imperial Capital said.

Precision Castparts, based in Portland, Ore., makes castings, forgings, fasteners for aircraft and industrial gas turbines.   Continued...