29th Jan 2025 08:46
(Alliance News) - Dowlais Group PLC on Wednesday accepted a GBP1.16 billion takeover by American Axle & Manufacturing, a producer of driveline products and systems.
"The combination will bring together two companies with highly complementary customer bases, geographic footprints, powertrain-agnostic product portfolios, and manufacturing operations," Detroit, Michigan-based AAM commented.
Shareholders in London-based automotive engineering firm Dowlais stand to receive 0.0863 of a new AAM share, as well as 42 pence in cash and up to 2.8p in the form of a Dowlais final dividend.
The terms of the deal imply an 85.2p value per Dowlais share, based on AAM's closing price of USD5.82 on Tuesday. The offer price is a 25% premium to the Dowlais Tuesday closing price.
The deal gives the firm a GBP1.16 billion value on a fully diluted basis. AAM is worth USD684.3 million. On completion, Dowlais will hold 49% of the enlarged group.
On Wednesday, shares in Dowlais were 9.0% higher at 74.48 pence each, giving the firm a market value of GBP1.00 billion.
Dowlais Chair Simon Mackenzie Smith said the deal creates "significant shareholder value".
"The Dowlais board is unanimous in its view that the proposed combination with AAM offers a compelling opportunity to unlock value for our shareholders. The strategic rationale for the combination is clear: together, we create a global leader with enhanced financial strength, broader diversification and a market-leading product portfolio that spans traditional and electrified powertrain solutions," he added.
AAM said it believes the combination will create significant annual run rate cost synergies of USD300 million, expected to be substantially achieved by the end of the third year after completion.
The enlarged group would have revenue of around USD12 billion and adjusted earnings before interest, tax, depreciation and amortisation margins of 14%.
AAM's capital allocation policy will prioritise debt repayment whilst supporting organic growth until net leverage is below 2.5 times, at which point AAM intends to move to a more balanced capital allocation policy, it added.
In addition, the merged entity will benefit from a more diversified business model, AAM said.
"This model will feature a robust cash-generative financial profile, a strong balance sheet, and a more competitive and margin enhancing position than the stand alone businesses, enabling continued innovation, growth, and long-term value creation for shareholders as the industry transitions to alternate propulsion technologies," AAM said.
AAM said it had received backing from Dowlais directors representing 0.3% of the firm's share capital.
Dowlais was spun out of Melrose Industries in April 2023. Dowlais includes the GKN Automotive and the GKN Powder Metallurgy businesses.
Dowlais said it has cancelled a previously announced GBP50 million share buyback programme with immediate effect after agreeing the AAM deal.
By Jeremy Cutler, Alliance News reporter
Comments and questions to [email protected]
Copyright 2025 Alliance News Ltd. All Rights Reserved.
Related Shares:
DowlaisMelrose