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American Axle to Sell U.S Iron Casting Unit to Gamut Capital

Zacks Equity Research

American Axle & Manufacturing Holdings, Inc. AXL entered an agreement to sell its U.S iron casting operations, named Grede, to funds managed by New York-based private investment firm, Gamut Capital Management, for $245 million.

The total consideration includes $185 million in cash and a $60-million deferred payment obligation. Subject to satisfactory closing conditions, the transaction is set for closure in the fourth quarter of 2019.

Grede comprises 10 manufacturing facilities that develop, manufacture, assemble and supply products such as specialty iron castings and machined components for the automotive, commercial vehicle and industrial markets. Notably, last year, it generated $781 million in revenues.

The deal is a win-win situation for the seller as well as the buyer. For Detroit-based American Axle, the sale of Grede will help the firm to streamline its portfolio, reduce debt and improve margin profile. The net cash proceeds from the sale will be used to repay outstanding debt of American Axle. Further, this can help the company to invest in its highly engineered product portfolio and more profitable growth opportunities — including electrification, which will bolster its value proposition. The acquisition of Grede offers significant growth opportunities to Gamut Capital.

Meanwhile, American Axle will retain its Mexico iron casting operations named El Carmen. The operations will not only continue to provide the company with vertical integration advantages but also serve external customers in Mexico and other global markets.

American Axle & Manufacturing Holdings, Inc. Price and Consensus

 

American Axle & Manufacturing Holdings, Inc. Price and Consensus

American Axle & Manufacturing Holdings, Inc. price-consensus-chart | American Axle & Manufacturing Holdings, Inc. Quote

Zacks Rank & Stocks to Consider

American Axle currently carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the Auto-Tires-Trucks sector are Lithia Motors LAD, currently sporting a Zacks Rank #1 (Strong Buy), as well as Douglas Dynamics, Inc. PLOW and SPX Corp. SPXC, carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lithia Motors has an expected earnings growth rate of 12.8% for 2019. The company’s shares have gained 71.5% year to date.

Douglas Dynamics has an expected earnings growth rate of 11.7% for 2019. The company’s shares have risen 23.3% year to date.

SPX has an estimated earnings growth rate of 22.7% for the current year. Its shares have gained 19.9% year to date.

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