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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 the complete 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 authorised 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 part of AAM’s board, and 4 Dowlais executives will likely be built-in into AAM’s management workforce.
Bringing collectively complementary product traces, the merged entity will cater to inner combustion engine (ICE), hybrid, and electrical car (EV) manufacturing. A stronger price construction is anticipated to reinforce its skill to serve a various buyer base whereas adapting to evolving propulsion applied sciences.
Beneath 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 ultimate 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 value and the Sterling to Greenback trade fee as of January 28, 2025, locations Dowlais shares at 85.2p every, equating to a completely diluted valuation of roughly £1.16 billion. The provide represents a 25% premium over Dowlais’ closing value on January 28, 2025, and a forty five% premium in comparison with its three-month volume-weighted common value.
For the deal, J.P. Morgan is serving as AAM’s unique monetary advisor and has offered dedicated debt financing for the transaction. Authorized advisory providers are being offered by Allen Overy Shearman Sterling LLP. Moreover, Dowlais is receiving monetary recommendation from Barclays Financial institution plc and Rothschild & Co, with Slaughter and Could performing as its authorized counsel.
Company evolution and 3D printing affect
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 position in advancing steel 3D printing, notably by means 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 provided 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 the usage of 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 keeping with 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 12 months after closing. Based mostly on this, AAM anticipates earnings will develop within the first full 12 months after the transaction closes.
AAM has additionally issued preliminary monetary projections for the fiscal 12 months 2024, estimating income between $6.10 billion and $6.15 billion, adjusted EBITDA between $740 million and $750 million, and adjusted free money move within the vary of $220 million to $230 million. These figures stay topic to ultimate changes.
Furthermore, the money portion of the deal will likely be lined by means of current funds and debt, with no anticipated internet leverage enhance at closing. Monetary enhancements and anticipated money move development ought to facilitate future investments and debt discount.
The merger will proceed as a Court docket-sanctioned scheme of association underneath Half 26 of the Firms 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 tip of 2025, with financing already secured.
Upon completion, AAM will proceed buying and selling on the New York Inventory Alternate (NYSE) underneath the ticker “AXL.” The newly issued AAM shares will likely be listed on the NYSE, pending regulatory approvals. Purposes will likely be made to take away Dowlais shares from the London Inventory Alternate (LSE) and the UK Official Checklist.
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Featured picture reveals Dowlais Group listed on the London Inventory Alternate. Picture through Dowlais.
