Alcoa buys titanium production for aerospace reinforcement

Alcoa, the most prominent aluminum producer in the United States, acquires RTI International Metals, which specializes in the production and supply of titanium, for $ 1.3 billion. More than 80 percent of RTI's business is focused on the aerospace and defense industry. This acquisition for Alcoa is the latest step towards diversification in high value added products.

"This makes our business a very attractive aerospace market," Alcoa CEO Klaus Kleinfeld said in an interview, adding that titanium is the most sought-after metal used in aerospace products.

Alcoa also completed the acquisition of Tital, a German manufacturer of titanium and aluminum structural aircraft castings, last week. “Basically, we became titans in titanium,” said Kleinfeld.

RTI, whose customer base includes Boeing Co, reports revenues of $ 794 million in 2014, while Alcoa expects to generate revenues of $ 850 million in 2015 and hopes RTI can reach $ 1.2 billion by 2019 year.

Alcoa plans to increase its share of projects in the global aerospace industry. Alcoa is now considering shutting down 14 percent of its smelter capacity, or 500,000 tonnes, shifting its focus from more traditional products to high-value businesses. Alcoa has cut 1.3 million tonnes of smelting capacity since 2007, despite opening a plant in Saudi Arabia.

"Strategically, this deal fits into Alcoa's ongoing transformation," writes BMO Capital Markets analyst David Galliano, but calls the deal "expensive" as Alcoa pays more for RTI shares than they currently stand.