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American Axle & Manufacturing (AAM) has finalized an settlement with the board of engineering firm Dowlais Group for a proposed money and share provide to amass all the issued and to-be-issued share capital of Dowlais.
Valued at roughly $1.44 billion, this deal entails a mixture of money and AAM shares. Boards from each AAM and Dowlais have accredited the deal. As soon as finalized, the mixed enterprise will function out of Detroit, Michigan, with AAM Chairman and CEO David C. Dauch on the helm.
Two Dowlais board members, Simon Mackenzie Smith and Fiona MacAulay, will be a part of AAM’s board, and 4 Dowlais executives can be built-in into AAM’s management workforce.
Bringing collectively complementary product strains, the merged entity will cater to inner combustion engine (ICE), hybrid, and electrical car (EV) manufacturing. A stronger value construction is anticipated to reinforce its capability to serve a various buyer base whereas adapting to evolving propulsion applied sciences.
Underneath the settlement, Dowlais shareholders will obtain 0.0863 shares of recent AAM frequent inventory, 42 pence (p) per share in money, and as much as 2.8p from Dowlais’ FY24 last dividend for every Dowlais share. As soon as the transaction is full, AAM shareholders will management roughly 51% of the mixed enterprise, leaving Dowlais shareholders with a 49% stake.
A valuation based mostly on AAM’s closing share worth and the Sterling to Greenback trade charge as of January 28, 2025, locations Dowlais shares at 85.2p every, equating to a totally diluted valuation of roughly £1.16 billion. The provide represents a 25% premium over Dowlais’ closing worth on January 28, 2025, and a forty five% premium in comparison with its three-month volume-weighted common worth.
For the deal, J.P. Morgan is serving as AAM’s unique monetary advisor and has supplied dedicated debt financing for the transaction. Authorized advisory providers are being supplied by Allen Overy Shearman Sterling LLP. Moreover, Dowlais is receiving monetary recommendation from Barclays Financial institution plc and Rothschild & Co, with Slaughter and Might appearing as its authorized counsel.
Company evolution and 3D printing impression
Established in 1759, GKN underwent main transformations in recent times. Initially a British multinational engineering firm, the enterprise was acquired by Melrose Industries in 2018. This acquisition noticed the corporate break up into three separate companies: GKN Aerospace, GKN Automotive, and GKN Powder Metallurgy.
A restructuring adopted, resulting in the spin-off of automotive and powder metallurgy divisions underneath Dowlais Group plc in 2023. Melrose retained management of GKN Aerospace, whereas Dowlais assumed accountability for GKN’s Automotive, and Powder Metallurgy divisions.
GKN Powder Metallurgy has performed a pivotal function in advancing steel 3D printing, notably by way of its GKN Additive division. Experience in steel powders and AM applied sciences has pushed improvements in binder jetting and laser-based steel 3D printing.
The corporate has additionally equipped supplies and manufacturing capabilities for aerospace and automotive purposes, leveraging AM for light-weight, high-performance parts.
With AAM’s acquisition of Dowlais, GKN Powder Metallurgy will now function underneath AAM’s umbrella. Entry to superior AM applied sciences may speed up using additive manufacturing for fast prototyping, custom-made manufacturing, and high-efficiency mass manufacturing, notably within the automotive sector.
Integration of experience from each corporations can also develop AM purposes past automotive, strengthening AAM’s aggressive edge.
Monetary and strategic outlook
In response to AAM’s press launch, projected synergies from the deal quantity to roughly $300 million. With projected annual income of $12 billion, AAM expects earnings to rise within the first full yr after closing. Primarily based on this, AAM anticipates earnings will develop within the first full yr after the transaction closes.
AAM has additionally issued preliminary monetary projections for the fiscal yr 2024, estimating income between $6.10 billion and $6.15 billion, adjusted EBITDA between $740 million and $750 million, and adjusted free money circulate within the vary of $220 million to $230 million. These figures stay topic to last changes.
Furthermore, the money portion of the deal can be coated by way of current funds and debt, with no anticipated web leverage improve at closing. Monetary enhancements and anticipated money circulate development ought to facilitate future investments and debt discount.
The merger will proceed as a Courtroom-sanctioned scheme of association underneath Half 26 of the Corporations Act 2006, although AAM retains the choice to execute it as a takeover provide underneath Chapter 3 of Half 28 of the Act. Pending shareholder and regulatory approvals, the deal is anticipated to shut by the top of 2025, with financing already secured.
Upon completion, AAM will proceed buying and selling on the New York Inventory Trade (NYSE) underneath the ticker “AXL.” The newly issued AAM shares can be listed on the NYSE, pending regulatory approvals. Purposes can be made to take away Dowlais shares from the London Inventory Trade (LSE) and the UK Official Record.
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Featured picture exhibits Dowlais Group listed on the London Inventory Trade. Picture by way of Dowlais.
