American Axle & Manufacturing (AAM) has agreed to acquire UK-based car parts maker Dowlais Group in a cash and stock deal valued at approximately $1.44bn.
The deal aims to create a “leading global driveline and metal-forming supplier” for the automotive industry, with a product portfolio suitable for internal combustion engine (ICE), hybrid, and electric vehicles (EV).
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Under the deal terms, Dowlais shareholders will receive 0.0863 new AAM common stock shares, 42 pence in cash per share, and up to 2.8 pence of Dowlais’ FY24 final dividend for each Dowlais share prior to the closing of the deal.
Post-transaction, AAM shareholders are expected to hold a 51% stake in the combined entity, with Dowlais shareholders owning the remaining 49%.
Based on AAM’s closing share price on 28 January 2025, the deal represents an 85.2 pence per share value for Dowlais, equating to a 25% premium over Dowlais’ closing share price on the same date.
This premium extends to 45% over the volume-weighted average share price for the past three months.
The combined company is anticipated to yield approximately $300m in synergies, with the merged company benefiting from “high margins with strong earnings accretion, cash flow and balance sheet”.
The improved financial profile is expected to support investments in growth and accelerate debt reduction.
The boards of directors of both AAM and Dowlais have unanimously approved the transaction.
Following the closure, the combined company will be headquartered in Detroit, Michigan, and led by AAM chairman and CEO David C Dauch.
Additionally, two independent Dowlais directors, Simon Mackenzie Smith and Fiona MacAulay, will join the board of the new entity.
The acquisition is expected to conclude by the end of 2025, following shareholder and regulatory approvals, as well as other customary closing conditions.
J.P. Morgan is providing exclusive financial advice and committed debt financing to AAM, with legal counsel from Allen Overy Shearman Sterling.
Dowlais has engaged Barclays Bank and Rothschild & Co for financial advice, with Slaughter and May providing legal advice.
