Precision Castparts enters into a definitive agreement to acquire Titanium Metals Corp. for $16.50 per share in cash. The transaction values Titanium Metals Corp. (Timet) at a total enterprise value of approximately $2.9 billion, including net cash and equivalents.
"Timet will provide us with the titanium capability that has always been a key missing piece of our overall product portfolio," says Mark Donegan, chairman and chief executive officer of Precision Castparts Corp. (PCC). "As our 2006 acquisition of Special Metals did for us with nickel alloys, acquiring Timet will enable us to streamline our supply chain and better manage our input costs in our core operations. As we continue to grow in the aerostructure market, this supply linkage will present even more of an opportunity.
"The potential for value creation is vast -- we expect to generate significant synergies by putting our two companies together and leveraging our respective strengths," Donegan adds. "Timet's melting expertise and PCC's forging and conversion assets are a complementary strategic fit. We will attack our collective cost structure and leverage our combined conversion assets to further enhance our respective customer presences and to penetrate new markets.
"This transaction is truly a needle mover, a deal that offers PCC and our customers a wide range of opportunities going forward," Donegan concludes. We've worked with Timet for many years and are quite familiar with their operations, so we expect integration to move ahead quickly once the merger is completed."
The transaction has been unanimously approved by the Board of Directors of Timet (following the unanimous recommendation of a special committee of independent directors) and the Board of Directors of PCC. Timet's Board will recommend that all stockholders tender their shares in the offer, and entities affiliated with Contran Corp. have agreed, subject to the terms of a support agreement, to tender shares representing approximately 45% of the total outstanding shares in the offer.
PCC has secured a fully underwritten $3.0 billion bridge financing commitment that may be used to complete this acquisition. The acquisition will ultimately be funded through a combination of cash on hand, commercial paper, bank debt, and proceeds from the sale of notes and bonds. The transaction is not conditioned upon PCC obtaining financing.
The acquisition of Timet is expected to be immediately accretive to earnings. Subject to the satisfaction or waiver of certain conditions, the tender offer is expected to be completed by the end of calendar year 2012, after which Timet's results will be reported as part of PCC's Forged Products segment.
Under the terms of the merger agreement, PCC will commence a cash tender offer by November 20, 2012 to acquire all outstanding shares of Timet for $16.50 per share, net to the tendering holder in cash. The offer will contain certain customary conditions, including tender of the majority of the outstanding shares not owned by Contran Corp. and affiliated entities, and approval by regulatory agencies. Upon satisfaction of the conditions to the tender offer and after such time as all shares tendered in the tender offer are accepted for payment, the merger agreement provides for the parties to effect, subject to customary closing conditions, a merger that would result in all shares not tendered in the tender offer being converted into the right to receive $16.50 per share in cash.