ShareThis Page

Alcoa to spend $2.85B on jet engine parts maker Firth Rixson

| Thursday, June 26, 2014, 8:48 a.m.

Alcoa Inc. moved further into the aerospace industry, spending nearly $3 billion for a leading jet-engine component company and advancing its focus on higher profit-margin products.

The aluminum manufacturer said Thursday that the deal for U.K.-based Firth Rixson Ltd. will boost annual aerospace revenue by $800 million, or 20 percent, to about $4.8 billion, as the company continues to diversify its business beyond its mining and aluminum smelting roots.

Alcoa shares jumped 2.7 percent, up 39 cents to $14.94, within reach of a three-year high. The New York-based company employs about 2,000 in the Pittsburgh area — at its corporate operations center on the North Shore, the Alcoa Technical Center in Upper Burrell, and Traco Co., a window manufacturer in Cranberry.

“It really nicely adds into our core jet engine suite,” said CEO Klaus Kleinfeld, on a conference call. Firth Rixson's strength in jet engine rings and forgings, added to Alcoa's position in fasteners, structures and castings, “creates a very compelling full offering ... that's the beauty of this transaction.

“Firth Rixson doubles the Alcoa average engine content in the key programs,” Kleinfeld said, calling the deal a “major milestone” in Alcoa's transformation. It will “bring together some of the greatest innovators in jet engine component technology (and) will significantly expand our market leadership and growth potential.”

Firth Rixson's revenue is growing twice as fast as the global aerospace market, at about 12 percent a year between 2013 and 2019, Alcoa said. It's revenue is expected to grow 60 percent over the next three years, from $1 billion in 2013 to $1.6 billion.

“It captures growth in the commercial jet and commercial engine market; very, very cool market, 7 percent growth,” Kleinfeld said. “I mean, show me other markets where you see that with a nine-year order backlog. That is fantastic.”

Alcoa will pay $2.35 billion in cash and $500 million in stock to Firth Rixson's owner, private equity firm Oak Hill Capital. It also may spend an additional $150 million based on pre-set performance targets.

Firth Rixson has operations in the United States, Asia and Europe.

Josh Sullivan, an analyst with Sterne Agee, said the move is good for Alcoa because it strengthens its position in a growing aerospace sector. The industry has accounted for about $4 billion of the company's $23 billion in overall sales last year, he noted. Alcoa has said it expects the aerospace industry to grow by 8 percent to 9 percent this year.

The acquisition gives the company access to isothermal forging technology that is going into the next generation of aircraft engines, which should prove profitable for Alcoa, Sullivan said.

Isothermally forged parts are increasingly required in jet engines that use higher temperatures to maximize power output, drive fuel efficiency and reduce emissions. Firth Rixson's plant in Savannah, Ga., has a 19,500 ton isothermal press. Alcoa has not invested in the process, Kleinfeld said.

“This isn't just about buying a different portfolio,” Sullivan said. “This is an attractive portfolio that brings a broader set of capabilities with high-margin business.”

Sullivan said the aluminum side of Alcoa's business is looking good as automakers look to use the metal to make cars lighter amid pressure to improve fuel efficiency.

About 30 percent of new vehicles are rolling off the production line with aluminum hoods. Ford unveiled an aluminum-body 2015 F-150 pickup that has all the power of the original, but weighs up to 700 pounds less. The truck goes on sale this year.

“The whole company is going through a Renaissance. These trends will continue over the next few years,” Sullivan said.

In April, the company reported a quarterly loss of $178 million. Aluminum prices haven't recovered since the recession and Alcoa has been idling smelters to reduce capacity and cut costs.

The boards of directors for both companies approved the Firth Rixson deal, which is expected to close by the end of this year.

The Associated Press and Trib Total Media staff writers David Conti and Alex Nixon contributed. John D. Oravecz is a staff writer for Trib Total Media. He can be reached at 412-320-7882 or

TribLIVE commenting policy

You are solely responsible for your comments and by using you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.