(Corrects fourth paragraph of story published Nov. 9 to show CEO’s comments were made on a conference call.)
Precision Castparts Corp. (PCP), the maker of metal forgings for jet engines, agreed to buy Texas billionaire Harold Simmons’s Titanium Metals Corp. (TIE) for $2.9 billion in its largest acquisition in almost two decades.
Titanium Metals stockholders will get $16.50 a share, 44 percent more than the Dallas-based company’s closing price yesterday, according to a statement. Entities controlled by Simmons have agreed to sell their 45 percent stake in the company, known as Timet, Precision Castparts said.
The deal, Precision’s largest since at least 1995, extends an acquisition spree under Chief Executive Officer Mark Donegan, who has overseen more than two dozen purchases in the past decade, data compiled by Bloomberg show. Planemakers Boeing Co. (BA) and Airbus SAS have urged suppliers to consolidate to help support record increases in jet output.
Donegan said in a July conference call that he foresaw at least $1 billion in merger opportunities in the next 16 months. Portland, Oregon-based Precision agreed last month to acquire pipe processor Texas Honing Inc., and said in July it was buying four factories from Canadian landing-gear maker Heroux-Devtek Inc. (HRX) to expand in the aviation-parts industry.
The 44 percent premium compares to an average 37 percent for 23 non-ferrous metals companies in the U.S. bought in the past five years, according to data compiled by Bloomberg. The deal price represents a multiple of about 1.7 times total assets, compared with the 1.96 median of four deals, data show.
The acquisition, which is not contingent on Precision obtaining financing, is scheduled to close next month, the companies said. Funding will come from a combination of cash and short- and long-term debt, Precision said.
Precision has climbed 4 percent this year to $171.33, trailing the Standard & Poor’s 500 Industrials Index. Titanium Metals dropped 23 percent to $11.57 in the same period.
Simmons, 81, didn’t immediately respond to a phone call and an e-mail seeking comment on the transaction.
His Contran Corp. holds stakes in companies that include Keystone Consolidated Industries Inc. (KYCN), a maker of wire products, and Valhi Inc. (VHI), whose products include titanium products and titanium dioxide pigments.
Simmons has long been active in Texas politics and made forays into national elections as well. He gave $2.3 million to the Restore Our Future super-PAC that backed Republican presidential nominee Mitt Romney, and in 2004, he donated $4 million to Swift Boat Veterans for Truth, a group that questioned Democratic nominee John Kerry’s Vietnam War service.
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