Sheffield industrial titan in $2.85bn deal

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ONE of the best-known names in the Sheffield manufacturing industry is changing hands in a $2.85bn deal.

Alcoa has agreed to buy aircraft parts maker Firth Rixson from US private equity firm Oak Hill Capital Partners.

The deal will grow Alcoa’s aerospace segment and boost the light metals giant’s production of nickel and titanium goods.

Firth Rixson traces its history back to Firth Brown and Woodhouse and Rixson, founding fathers of the steel industry in the early 19th century.

Alcoa, formerly the Aluminium Company of America, is the third biggest aluminium producer in the world behind Rio Tinto Alcan and Rusal.

Low aluminum prices have been weighing on Alcoa and the company has been trying to grow its more profitable downstream businesses, which sell products like truck wheels and aircraft fuselages instead of low-margin, less-processed metal. Alcoa has also been cutting costs and closing high smelting capacity.

Peter Bland, chief financial officer, told The Yorkshire Post: “It’s a deal that works well for both parties.

“For Firth Rixson’s perspective, we have been on a remarkable growth trajectory over the last several years.

“Our annual sales have increased from $300m to more than $1bn today so tremendous growth.

“Our current owner has been incredibly supportive, making a number of transformational investments.

“These investments have ensured the business has grown and will continue to grow at a very strong rate. That’s what attracted Alcoa.”

Firth Rixson has provided rich pickings for its backers.

Carlyle, the US private equity giant, took the firm private in 2003 in a £106m deal in its first major investment in the UK.

It consolidated the aerospace rings sector and became the first Western ring-roller in China in 2005.

Carlyle sold its stake to Oak Hill in a £2bn deal in 2007.

Firth Rixson has doubled the size of its facility in Sheffield in recent years and is investing £35m in plant and machinery at the site.

The company employs 550 people in Sheffield. It has six other sites across the UK.

Mr Bland, who has been with the business for 20 years, said the opportunity for the merged business to grow is substantial.

He said the deal is about expansion and business growth and site closure is not on the agenda.

Mr Bland added: “Our capability and our factories complementary to what Alcoa does, rather than duplicate what they do.”

The company said it has secured interim financing for the deal from Morgan Stanley, and will issue “a prudent combination” of equity content securities. It expects the takeover to boost its aerospace revenue by 20 per cent, to some $4.8bn a year, but sees no impact on earnings until the second year.

The deal value includes $2.35bn in cash, $500m of stock and an earn-out that could be worth $150m.

Klaus Kleinfeld, chairman and chief executive of Alcoa, said: “The acquisition of Firth Rixson is a major milestone in Alcoa’s transformation. This transaction will bring together some of the greatest innovators in jet engine component technology; it will significantly expand our market leadership and growth potential.”