Kennametal will obtain the tungsten materials business of Allegheny Technologies for $605 million in cash and stock.
The acquisition will increase Kennametal’s access to raw material for its metalworking tools and allow Allegheny to develop its high-performance metals and flat-rolled products divisions.
Allegheny’s tungsten business produces tungsten powder, tungsten heavy alloys, and carbide materials and carbide cutting tools. The division generated $338.6 million in revenue last year and $37.2 million in operating earnings, according to Reuters. Kennametal will apply the tungsten business and its 1,175 employees in the pursuit of more business in the aerospace and energy industries.
The deal, which is expected to close in the fourth quarter, is expected to reduce Kennametal’s capital expenditure by about $30 million to $35 million after a year of remaining earnings neutral, according to the The Associated Press.
“The acquisition will be accretive to earnings per share within a year,” Carlos Cardoso, Kennametal CEO, told Reuters.