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RTI shares up as Alcoa plans deal valued at $1.5B

RTI shares up as Alcoa plans deal valued at $1.5B

Alcoa said Monday it plans to buy RTI International Metals in a deal valued at about $1.5 billion, a strategic move by the metals giant to boost its aerospace business. Shares of RTI rose 44% in pre-market trading to $39.40. In the all-stock transaction, Alcoa will pay 2.8315 shares for each RTI share, which is $41 per RTI share based on Alcoa’s closing price on March 6. Alcoa also gets $330 million of RTI’s cash and up to $517 million in RTI’s convertible notes.AP ALCOA ACQUISITION F A USA PA

Alcoa fell 4% in pre-market trading to $13.90. “Innovation and scale are critical to winning in both the titanium and aerospace industries today,” RTI CEO Dawne Hickton said in a statement.

In buying titanium supplier RTI, Alcoa expands its presence in the reliable commercial aerospace and defense markets. In 2014, about 80% of RTI’s revenue came from the aerospace and defense industry, which is increasingly using titanium for its products. The industry’s titanium spending is estimated to grow by about 5% annually over the next five years, Alcoa said.

RTI will also bring “additive manufacturing” capabilities, including 3-D printing for titanium, specialty metals and plastic parts, Alcoa said. According to Alcoa’s projection, the global aerospace market will grow about 5% to 6% through 2019. RTI is estimated to contribute $1.2 billion in revenues in 2019 vs. $794 million in 2014, according to Alcoa. The deal has been approved by the companies’ boards of directors and is expected to close in three to six months.

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