Ten years of wooing paid off for Kennametal chairman, president and CEO Carlos Cardoso on Monday when the Latrobe tool producer announced it will acquire Allegheny Technologies' tungsten materials business for $605 million.
Mr. Cardoso said the purchase will bolster Kennametal's sales to the aerospace and energy markets, and diversify its supply of tungsten -- a hard, dense metal used in cutting tools.
"I personally have been talking to Allegheny about this business for 10 years," Mr. Cardoso told analysts during a conference call.
Allegheny Technologies, a Pittsburgh specialty metals producer with annual revenue of $5 billion, said the sale will allow it to focus on its high performance metals and flat-rolled products businesses.
Its tungsten unit supplies powders and alloys, tungsten carbide and carbide cutting tools. The unit had 2012 sales of $338.6 million and operating profits of $37.2 million. The business has 1,175 employees.
The operations include making tungsten tool bits by recycling used ones. Acquiring that capability will reduce Kennametal's need to purchase tungsten from China and other suppliers, Mr. Cardoso said.
Last month, the company completed its acquisition of Comercializadora Emura, a Bolivian tungsten ore producer that had been one of Kennametal's long-term suppliers. Terms were not disclosed.
Kennametal said it will purchase the Allegheny Technologies unit with cash and available credit. The sale is subject to regulatory approvals and is expected to be completed before the end of the year.
Mr. Cardoso said the acquisition is expected to generate $30 million to $40 million in annual efficiencies and will reduce capital expenditures the company expected to make in its tungsten business by $30 million to $35 million.
Shares of both Kennametal and Allegheny Technologies advanced Monday, keeping pace with a broad market advance. Kennametal shares finished at $46.39, up 39 cents, while Allegheny Technologies jumped $2.32 to close at $30.95.
First Published: September 16, 2013, 1:30 p.m.
Updated: September 16, 2013, 10:55 p.m.
