Alcoa to buy titanium supplier RTI to boost aerospace business

Mon Mar 9, 2015 3:14pm EDT
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By Nick Carey

CHICAGO (Reuters) - Alcoa Inc agreed to pay $1.3 billion to acquire titanium supplier RTI International Metals Inc, the metals company's latest investment in more profitable products for the aerospace and automotive industries.

Alcoa is offering the equivalent of $41 per share - a 50 percent premium over RTI's closing price on Friday in an all-stock transaction.

RTI's stock rallied nearly 40 percent, but Alcoa's shares fell 7.5 percent to a nine-month low on concern it overpaid, analysts said.

New York-based Alcoa, best-known as an aluminum producer, said around 80 percent of RTI's business is in aerospace and defense. The acquisition is its latest move to diversify into value-added products.

"This builds out our value-added business in a very attractive market - aerospace," Alcoa Chief Executive Klaus Kleinfeld said in an interview, adding that titanium is the fastest-growing metal used in aerospace production.

Last week Alcoa completed the acquisition of Tital, a German manufacturer of titanium and aluminum structural castings for aircraft.

"Basically, we've become a titan in titanium," Kleinfeld said.

Pittsburgh-based RTI, whose customers include Boeing Co, reported revenue of $794 million in 2014, and said it expected revenue of $850 million in 2015. Alcoa expects RTI's sales to reach $1.2 billion by 2019.   Continued...

The Great Smoky Mountains are shown in the background in this view of the Alcoa Aluminum plant in Alcoa, Tennessee April 8, 2014.   REUTERS/Wade Payne