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Alcoa’s Firth deal transformative: analyst

Keywords: Tags  Alcoa, Josh W. Sullivan, Firth Rixson, Farnborough International Airshow, aerospace, mergers and aquisitions, isothermal forging, Nathan Laliberte

NEW YORK — Alcoa Inc.’s $2.85-billion acquisition of U.K. aerospace components manufacturer Firth Rixson Ltd. will transform the company’s aerospace operations by expanding its vertically integrated model as well as opening access to the double-digit growth rates in engine markets, according to an industry analyst.

The Pittsburgh-based aluminum producer announced the acquisition last month (, June 26).

"The deal was a primary topic at Farnborough (International Air Show), where consensus confirmed it would be transformative for Alcoa," Josh W. Sullivan, an analyst at Birmingham, Ala.-based Sterne Agee Group Inc., said in a July 18 research report, adding that the deal is not viewed as disruptive to core operations, given Alcoa is in "harvesting mode."

The acquisition should grow Alcoa’s overall aerospace revenue by about 20 percent and will further leverage the company to the aerospace cycle, Sullivan said. "Firth’s operations, such as isothermal forging, are heavily leveraged to next-generation engines just ramping up production. Firth, therefore, provides another aerospace growth vertical to Alcoa set to expand at twice the rate of the overall aerospace market’s 7-percent compound annual growth rate."

Isothermal forging—a hot-forging process, mainly for superalloys, in which materials and dies are heated to the same temperature—will be a crucial component in the production of next-generation jet engines, Sullivan said. "With each new generation of jet engines their cores require hotter operating temperatures to drive efficiency. Hotter operating temperatures require advanced metals, including super nickel alloys, titanium and powder metals. ... These advanced metals are much more difficult to shape, and therefore require specialized isothermal forging to form into aerospace products."

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