American Axle & Manufacturing ( AXL ) has entered into an agreement to purchase all outstanding shares of Dowlais Group plc (DWL) for about $1.44 billion.

This acquisition will involve a mix of cash and shares, creating a huge entity in the global driveline and metal-forming industries.

Approved by the boards of both companies, the deal aims to expand the American Axle’s product portfolio, spanning various vehicle types, including both internal combustion engine and electric vehicles.

The terms of the deal outline that each Dowlais shareholder will receive 0.0863 shares of American Axle, along with 42 pence in cash for every Dowlais share they hold.

Furthermore, Dowlais will distribute a final dividend of up to 2.8 pence per share for the 2024 fiscal year. The overall value of the transaction is estimated at 85.2 pence per Dowlais share, marking a 25% premium compared to its closing price on January 28, 2025.

Upon completion, the newly formed company is expected to have American Axle shareholders owning 51% and Dowlais shareholders holding 49%.

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“This announcement marks another key milestone in our continued long-term strategic growth plan,” said American Axle’s Chairman and CEO David C. Dauch.

“Together with Dowlais, we will have the powertrain-agnostic product portfolio, global reach, commitment to innovation and financial strength to meet the needs of customers and succeed in a dynamic market environment.”

The company expects the deal to deliver approximately $300 million in annual run rate cost synergies and high earnings accretion in the first full year following the transaction’s close. Also, American Axle forecasts strong financial results following the merger, with annual revenues of about $12 billion on a non-adjusted combined basis.

After the deal is finalized, the headquarters of the merged company will stay in Detroit, Michigan, with David C. Dauch, American Axle’s current Chairman and CEO, at the helm.

The transaction is anticipated to be completed by the end of 2025. The company held $542.5 million in cash and equivalents as of September 30, 2024.

Following the completion, Dowlais shares will be delisted from the London Stock Exchange, while American Axle will continue to trade under its current NYSE ticker symbol, “AXL”.

Outlook: American Axle expects FY24 sales of $6.10 billion – $6.15 billion (consensus $6.125 billion). Adjusted EBITDA of $740 million – $750 million. Adjusted free cash flow of $220 million – $230 million.

Price Action: AXL shares traded lower by 8.25% at $5.35 premarket at last check Wednesday.

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