Global Fastener News

2002 FIN – Alcoa Acquires Fairchild Fasteners

June 06
00:00 2013

July 25, 2002 FIN – Aluminum giant Alcoa is expanding in the fastener industry by acquiring the Fairchild Fasteners division of Dulles, VA-based Fairchild Corporation for $657 million in cash.

Fairchild manufactures precision fastening systems and components for the aerospace industry. The company employs 4,600 workers in 15 facilities throughout the U.S., Germany, France, Portugal, Hungary, the UK and Australia.
The acquisition doubles Pittsburgh-based Alcoa’s presence in the fastener industry, which began in 2000 with the $2.3 billion purchase of Cordant Technologies Inc., including Huck Fasteners. Last year Alcoa bought Midwest Fastener Corporation, a privately held manufacturer with plants in South Holland, IL, and Valparaiso, IN.
The acquisition is part of Alcoa’s effort to move beyond its core aluminum business, which has seen a decline in recent years, to more profitable markets, according to the Wall Street Journal. Last year its fastener division outperformed Alcoa’s core aluminum business. Exact figures are not available. But Alcoa spokesperson Kevin Lowery said his company has been pleased with its performance in the fastener industry. The fastener industry “has done very well for us,” Lowery said.
Fairchild’s decision to sell its fastener division will allow the company to lessen its dependence on a single industry and reduce debt, Fairchild chairman and CEO Jeffrey Steiner said. He blamed the deterioration in the aerospace industry as a contributing factor in greenlighting the sale.
The sale enables Fairchild to retire as much as $400 million in debt. Steiner has earmarked the remaining cash to acquire companies outside the aviation market.
The Washington Post reported that industry analysts saw the deal as a coup for Steiner during a volatile period in the aerospace industry.
Fairchild Fasteners sold for more than nine times its operating profit of roughly $70 million. The sale, which is subject to shareholder and regulatory approval, is expected to close during the fourth quarter.
The sale helped Fairchild shares jump 72% to close at $5.65. Alcoa stock gained 10 cents, closing at $28.86.
The acquisition comes amid a prolonged stock slump for Alcoa. The company’s stock has lost more than 25% in the past year. Lower aluminum prices worldwide contributed to a 24% drop in earnings to $232 million for the second quarter. First half earnings were down 37%. Fairchild generates $571 million in revenues, which should boost Alcoa’s sagging bottom line. The aluminum maker expects Fairchild to contribute to earnings in the first year, along with generating three-year pretax savings of $50 million. Another $70 million in working capital reductions are also in the works.
Fairchild Fasteners, which got its start during the early days of commercial aviation, will be combined with Alcoa’s existing fastener business Huck to form Alcoa Fastening Systems. AFS revenue is expected to top $1 billion. About 60% of that revenue will be generated from aerospace customers, another 23% from commercial transportation, and the remaining 17% from the automotive industry.
Lowery said the leadership position at AFS would be filled after the sale closes. It’s unclear where the new division will be headquartered. Fairchild customers include Airbus, Boeing, General Electric, Honeywell, Lockheed Martin, Northrop Grumman, UTC, Wesco, Pentacon and the federal government. ©2002/2012 Fastener Industry News.
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