Kennametal Inc. (KMT:US), a maker of metal-cutting tools, agreed to buy the tungsten materials unit of supplier Allegheny Technologies Inc. (ATI:US) for $605 million to help expand its aerospace and energy business.
The acquisition is structured as both an asset and stock purchase that will create a cash tax benefit of as much as $70 million, Kennametal said today in a statement. The Latrobe, Pennsylvania-based company said it expects the deal to close by year’s end.
Adding ATI’s tungsten unit, which makes counterweights and control services for aerospace manufacturers in addition to industrial alloys and powders, will deepen Kennametal’s access to raw materials. It will also accelerate Kennametal’s plans to open its own tungsten carbide recycling facility.
The purchase will reduce planned capital expenditures by at least $30 million, Kennametal said. The company will use cash and available borrowings under its existing credit revolver to pay for the tungsten business. Pittsburgh-based ATI said the unit’s annual sales are about $340 million.
Kennametal was advised by JPMorgan Chase & Co. ATI’s financial adviser was Goldman, Sachs & Co., and K&L Gates LLP provided legal counsel.
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