Alcoa To Acquire Firth Rixson; Shares Up 5%

Early Thursday morning, Alcoa (NYSE: AA) announced that it has entered into a definitive agreement with Firth Rixson to acquire the company for $2.85 billion.

The deal will consist of a combination of $2.35 billion in cash and $500 million in common stock, as well as an additional $150 million in potential earn-out.

Firth Rixson is currently the top manufacturer of seamless rolled jet engine rings, engineered from nickel-based superalloys and titanium.

The deal will significantly expand Alcoa's aerospace portfolio and will offer the company further growth potential, as Firth Rixson's sales are expected to grow at double the rate of the global aerospace market through 2019.

"This transaction will bring together some of the greatest innovators in jet engine component technology; it will significantly expand our market leadership and growth potential. Firth Rixson increases the earnings power and broadens the market reach of our high-value aerospace portfolio and will deliver compelling and sustainable value for customers and shareholders,” said Klaus Kleinfeld, Alcoa Chairman and Chief Executive Officer.

The deal is expected to provide incremental revenue of $1.6 billion and $350 million of EBITDA in 2016, as well as produce annual savings of over $100 million by the fifth year, due to synergies.

Following the announcement, shares of Alcoa are trading up over five percent in the pre-market session.