Alcoa to buy RTI for $1.26B to expand aerospace unit

WASHINGTON — Alcoa agreed to acquire RTI International Metals for about $1.26 billion to expand its business making titanium and specialty-metals products for the aerospace industry.

The all-stock transaction, which values Pittsburgh-based RTI at $41 a share, is the third aerospace-related deal announced by Alcoa in less than nine months. Alcoa is focusing on areas that are more profitable than its commodity-aluminum business, which is the largest of any U.S. company.

Buying RTI will increase Alcoa’s aerospace revenues by 13 percent, both companies said Monday in a statement. Suppling components to jet-engine and aircraft makers is one of Alcoa’s strongest businesses right now. The global aerospace industry will grow as much as 10 percent this year, the New York-based company said in January, outpacing other aluminum end-use sectors such as automotive and construction.

The RTI deal “fits in with Alcoa’s ongoing transformation toward a downstream metal services/processing company, and away from the more volatile (and lower margin) upstream primary aluminum company,” David Gagliano, an analyst at BMO Capital Markets in New York, said in a note.

Alcoa’s accord to take over Pittsburgh-based RTI comes less than four months after it completed the $2.85 billion purchase of Firth Rixson, a British producer of specialty components used in jet engines. Alcoa also bought German aircraft-component maker Tital GmbH on March 3 for an undisclosed price.

While Alcoa’s downstream business is expanding, its production of primary aluminum has been declining. The company said last week it put 14 percent of its global smelting capacity under review for closing or divestment amid weak prices and a relentless increase in production from China. The company has curtailed, closed or sold 1.3 million tons, or 31 percent, of its smelting capacity since 2007.

Investors will receive 2.8315 Alcoa shares for each RTI share, representing a value of $41 per RTI share based on Alcoa’s March 6 closing price. The offer also represents a 50 percent premium to the closing price. The takeover is expected to close in three to six months.