American Axle & Manufacturing and Metaldyne Performance Group have entered into a definitive merger agreement under which AAM will acquire MPG for approximately US$1.6bn in cash and stock plus the assumption of $1.7bn in net debt.
"The combination brings together highly complementary businesses and forms a premier, global Tier 1 supplier with broad capabilities across powertrain, drivetrain and driveline product lines, as well as diversified customer base and end-markets," the pair said in a statement.
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Each share of MPG's common stock will be converted into the right to receive $13.50 per share in cash and 0.5 share of AAM common stock. Upon closing of the transaction, AAM's shareholders will own approximately 70% of the combined company and MPG's shareholders will own approximately 30%. The transaction has been approved by the boards of directors of both companies and is anticipated to close in the first half of 2017 subject to shareholder and regulatory approval and usual closing conditions.
Concurrent with the signing of the merger agreement, AAM entered into a voting agreement with an affiliate of American Securities, the controlling stockholder of MPG, pursuant to which American Securities has agreed to vote in favour of and otherwise support the transaction, subject to the terms of the voting agreement. Following the transaction, an affiliate of American Securities will own approximately 23% of the combined company.
"AAM's transformational acquisition of MPG brings together two complementary Tier 1 organisations to create a company with greater scale and increased diversity across products, customers and end markets," said David Dauch, AAM's chairman and CEO. "MPG's expertise in complex, highly-engineered powertrain components and its global footprint will be tremendous assets to AAM. Together, we are forming a company with increased earnings potential and enhanced cash flow generation."
Dauch will continue to head AAM which will remain based in Detroit. AAM's board will be expanded to 11 members with three designees of American Securities joining.
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