RTI International Shareholders Clear Takeover by Alcoa - Analyst Blog
Alcoa’s AA acquisition of titanium and specialty metal products supplier – RTI International Metals, Inc. RTI – has been cleared by the latter’s shareholders. At RTI’s annual meeting of shareholders held yesterday, more than 94% of the votes were cast in favor of the deal.
Alcoa, in March, said that it will buy RTI in a stock-for-stock deal worth $1.5 billion. Under the deal terms, shareholders of RTI will get 2.8315 shares of Alcoa for each RTI share. The deal value of $1.5 billion includes $330 million of RTI cash and up to $517 million in RTI’s convertible notes.
Alcoa has already received the necessary regulatory clearances for the deal. The approval by RTI shareholders satisfies one of the final conditions for the merger deal. The transaction, which is now subject to satisfaction of the remaining closing conditions, is expected to consummate on Jul 23.
The acquisition of RTI it a strategic fit for Alcoa as it complements the latter’s goal to strengthen its global aerospace business. The RTI buyout is expected to broaden Alcoa’s titanium offerings and add advanced technologies and materials to its portfolio. The acquisition will expand the market reach of Alcoa’s aerospace portfolio and fortify its position to leverage strong growth in the commercial aerospace sector.
Titanium is the fastest-growing aerospace metal and spending on titanium aerospace mill products has been projected rise 5% annually over the next 5 years on the back of high-growth, next-generation aircraft programs.
The buyout brings in considerable financial benefits to Alcoa. The company expects to realize meaningful cost synergy from the transaction with net synergies reaching around $100 million in 2019, mainly driven by productivity improvements. Moreover, RTI is expected to contribute $1.2 billion in sales in 2019 with 65% of that will be backed by contracts over the next 5 years.
Alcoa’s earnings for the second quarter of 2015 missed the Zacks Consensus Estimate, hit by lower aluminum pricing. Revenues rose year over year on strength across aerospace and automotive businesses, and beat expectations. The company backed its global aluminum demand growth forecast for 2015 but cut its growth expectations for the aerospace market.
While Alcoa is aggressively pursuing cost-cutting actions to drive results, it is exposed to weakness in the European building and construction and commercial transportation markets. Moreover, the company faces a weak pricing environment, which may continue to affect its earnings.
Alcoa currently holds a Zacks Rank #5 (Strong Sell).
Better-ranked stocks in the mining space include Energy Fuels Inc. UUUU and Silvercorp Metals Inc. SVM with both holding a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
ALCOA INC (AA): Free Stock Analysis Report
RTI INTL METALS (RTI): Free Stock Analysis Report
SILVERCORP METL (SVM): Free Stock Analysis Report
ENERGY FUELS (UUUU): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research