Precision Castparts Corporation is continuing its aggressive expansion strategy with an estimated $2.9 billion purchase of Titanium Metals Corporation. Timet is a Dallas-based producer of primary titanium products (forged ingots, slabs, billets, and mill forms), as well as titanium sponge (a stabilized reduction of titanium ore), and mill products (sheet, strip, tubing, pipes, and fittings.)
"Timet will provide us with the titanium capability that has always been a key missing piece of our overall product portfolio," stated PCC chairman and CEO Mark Donegan.
"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 aerospace market has been one of the areas that Precision Castparts has targeted (the energy sector is another) with investments totaling billions of dollars in the past two years. Its acquisitions have involved operations that produce machined components, aerostructures, investment castings, and forgings, as well as machining, testing, and heat-treating services.
PCC produces complex metal components for aerospace and energy markets, with three divisions that focus on forgings, investment castings, and fasteners and airframes.
The Timet organization has operations in Henderson, Nevada; Toronto, Ohio; Morgantown, Pennsylvania; Vallejo, California; Witton, England; Waunarlwydd, Wales; and Ugine, France. It has approximately 2,750 employees.
"The potential for value creation is vast,” according to Donegan. “We expect to generate significant synergies by putting our two companies together and leveraging our respective strengths,"
Donegan said Timet's melting expertise and PCC's forging and conversion assets are complementary, he indicated the combined companies will achieve greater market share and revenues, with a better cost structure, by “leveraging” metal conversion advantages and maximizing the value of customers' purchases.
Directors of both companies have approved the acquisition and Timet's board will recommend to shareholders that they should tender their shares in the offer. Approximately 45% of the outstanding shares in question will be tendered by Contran Corporation.
PCC will fund the purchase through available cash, commercial paper, bank debt, and the sale of bonds and notes. There are no conditions based on tentative financing.
The buyer stated it expects to close the tender offer before the end of this year, and predicted it will immediately contribute to its earnings.