Kennametal completes ATI Tungsten Materials acquisition

Kennametal completed the $605 million transaction on Monday, Nov. 4. The acquired business, which employs approximately 1,175 people, brings industry-leading tungsten carbide production and recycling capabilities, as well as a tooling and product portfolio with a strong position in aerospace, energy and process industries.

Stressing opportunities to achieve synergies across Kennametal and the acquired business, management projected integration costs of approximately $40 to $50 million through fiscal 2016, while it expects to realize annual savings of approximately $35 to $45 million, across three main areas as follows:

1. Concentrating the Footprint: Consolidating operations among both organizations, while driving productivity improvements with standardized processes;
2. Reducing Administrative Overhead: Reducing selling, general and administrative expense, increased sourcing efficiencies; and
3. Leveraging the Supply Chain: Combining supply chains, including raw-material costs; procurement; and streamlined manufacturing and distribution logistics.

For the eight months of fiscal 2014, Kennametal expects the acquisition to generate sales ranging from $200 to $220 million, with a neutral effect on earnings per share. The company also said it would realize approximately $60 to $70 million in cash tax benefits on the transaction (net present value).

The acquisition also defrays $30 to $35 million in capital expenditures which Kennametal had earmarked to build a new tungsten production and recycling facility in the United States. The company now plans to accelerate its metallurgical strategy by building on the acquired business' capabilities.