PITTSBURGH—Alcoa Inc. is delving deeper into the aerospace industry, spending nearly US$3 billion to acquire British jet engine component company Firth Rixson Ltd.
The Pittsburgh company said the deal will boost annual aerospace revenue by 20 per cent, to about US$4.8 billion, as the company continues to turn its focus away from its mining and aluminum smelting roots.
Alcoa will pay US$2.35 billion in cash and US$500 million in stock to Firth Rixson’s current owner, the private equity firm Oak Hill Capital Partners.
It also may spend an additional US$150 million based on pre-set performance targets.
Firth Rixson makes rings, forgings and other metal products for aerospace companies and other industries.
It has operations in the United States, Asia and Europe.
The high cost of producing aluminum and falling prices for the metal have pushed Alcoa toward more finished products that are used in aircraft, autos and other goods.
In April, the company reported quarterly losses of US$178 million.
Aluminum prices haven’t recovered since the recession and Alcoa has been idling smelters to reduce capacity and cut costs.
At the same time, Alcoa is shifting sideways toward components.
The company last month revealed that it would spend US$100 million to build factory in Indiana to make nickel-based engine parts for commercial airliners.
With fuel prices rising, demand for more fuel-efficient planes has soared.
Alcoa has said it expects the aerospace industry to grow by eight to nine per cent this year.
Automakers, too, want to lighten up.
Around 30 per cent of new vehicles are now rolling off the production line with aluminum hoods.
Ford Motor Co. has unveiled an aluminum-body 2015 F-150 pickup that has all the power of the original, but weighs as much as 700 lbs. less.
The truck goes on sale later this year.
The boards of directors for both companies have approved the Firth Rixson deal, which is expected to close by the end of this year.