* Precision offers $16.50/share for Titanium Metals
* Billionaire Harold Simmons's firm agrees to tender shares
* Acquisition to immediately add to earnings
* Shares of both companies rise in extended trading
By A. Ananthalakshmi
Nov 9 Precision Castparts Corp will pay
$2.9 billion for Titanium Metals Corp, controlled by
Texas billionaire Harold Simmons, to expand its portfolio of
casting products used in jet engines.
Precision Castparts, whose castings are used in every jet
aircraft engine program in production or under development, said
the acquisition of the titanium producer will help streamline
its supply chain and input costs.
"(Titanium Metals) will provide us with the titanium
capability that has always been a key missing piece of our
overall product portfolio," Precision Castparts Chief Executive
Mark Donegan said in a statement.
Simmons's Contran Corp and affiliates, who hold about 45
percent of Titanium Metals, have agreed to support the deal.
Precision Castparts makes castings, forgings, fastners for
aircraft and industrial gas turbines. With the acquisition, it
would expand its portfolio to include titanium sponge and melted
products that are used in engine and airframe components.
Titanium Metals' customers include Boeing, Rolls
Royce and United Technologies' Pratt & Whitney.
"It is a good acquisition," said Richard Whittington, an
analyst with Drexel Hamilton. "Precision Castparts has a long
history of handling supplier acquisitions very well and reducing
This is Precision Castparts's biggest acquisition since at
least 1996, according to Thomson Reuters data.
Precision Castparts, which expects the acquisition to
immediately add to its earnings, offered $16.50 per share for
Titanium Metals -- a 43 percent premium to the stock's Friday
"This transaction is truly a needle mover, a deal that
offers Precision Castparts and our customers a wide range of
opportunities going forward," CEO Donegan said.
Precision Castparts has secured a fully underwritten $3.0
billion bridge financing commitment that it said may be used to
complete the deal.
It has made six acquisitions so far in 2012, excluding the
proposed Titanium Metals bid.
Dallas, Texas-based Titanium Metals said the merger
agreement allows it to actively solicit other takeover bids for
a period of 45 days.
Morgan Stanley is acting as financial adviser to Titanium
Titanium Metals shares were above the offer price in
after-market trading, indicating that some investors were
expecting a higher bid. Precision Castparts shares rose 3
percent after closing at $171.33.