AAM Announces Combination with Dowlais for $1.44 Billion in Cash and Stock

 

American Axle & Manufacturing (AAM), (NYSE: AXL) is pleased to announce that it has reached an agreement with the board of the Dowlais Group plc (Dowlais), (LON: DWL) on the terms of a recommended cash and share offer to be made by AAM for the entire issued and to be issued ordinary share capital of Dowlais (the “Combination”) for approximately $1.44 billion in cash and AAM shares.

With a combined portfolio of products essential in the manufacturing of internal combustion engine (ICE), hybrid and electric vehicles (EV), coupled with an enhanced cost structure, the combined company will be well-positioned to serve a diverse customer base spanning multiple geographies and support changing propulsion trends as the industry continues to evolve.

Under the terms of the agreement, Dowlais shareholders will be entitled to receive for each share of Dowlais’ common stock: 0.0863 shares of new AAM common stock, 42 pence per share in cash and up to a 2.8 pence of Dowlais FY24 final dividend prior to closing. Upon closing of the transaction, it is expected that AAM shareholders will own approximately 51% of the combined group and Dowlais shareholders will own approximately 49%.

Based on AAM’s closing share price and the Sterling to Dollar exchange rate on January 28, 2025, the terms of the Combination (including the FY24 final dividend) represent a total implied value of 85.2 pence per Dowlais share and value the entire issued and to be issued ordinary share capital of Dowlais at approximately £1.16 billion on a fully diluted basis. This represents a 25 percent current premium to Dowlais’ January 28, 2025 closing share price and a 45 percent premium to the volume-weighted average share price of Dowlais for the three-month period ended January 28, 2025.

“This announcement marks another key milestone in our continued long-term strategic growth plan,” said David C. Dauch, AAM’s Chairman and Chief Executive Officer. “We are excited to bring together these two outstanding companies to create a leading driveline and metal-forming supplier serving the global automotive industry as it continues to evolve. The combination will create significant immediate and long-term shareholder value while helping to power a more sustainable future. 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.”

Simon Mackenzie Smith, Dowlais’ Chair, commented, “The Dowlais Board is unanimous in its view that the proposed combination with AAM offers a compelling opportunity to unlock value for our shareholders. The strategic rationale for the combination is clear: together, we create a global leader with enhanced financial strength, broader diversification and a market-leading product portfolio that spans traditional and electrified powertrain solutions. Importantly, our shareholders will benefit not only from an immediate premium, but also from the significant synergies that this combination will deliver. Whilst the Dowlais Board remain confident in our stand-alone strategy, this transaction creates significant shareholder value while ensuring that our outstanding businesses continue to shape the future of mobility.”

Liam Butterworth, Dowlais’ Chief Executive Officer, added, “Today’s announcement marks a significant opportunity to build on the success of Dowlais Group. The combination of the two companies accelerates the execution of our strategy by leveraging our combined scale, resources, capabilities, and outstanding management teams. Our product portfolios and technological expertise are highly complementary, positioning us to better serve our customers and exceed their expectations. This transaction also combines our respective strengths in innovation, technology, and talent, creating a solid foundation for delivering long-term value to our shareholders. Our shared vision is to be a leading supplier of power-agnostic products as the world transitions to electrified mobility while maintaining operational excellence and driving sustainable growth, improved margins, and stronger cash flow generation. Together, we will unlock significant synergies, accelerate innovation, and position the combined group for long-term success in a dynamic industry. I am incredibly proud of what our team has achieved and excited about the opportunities that lie ahead for the combined group.”

Compelling Strategic Rationale
There are strategic reasons that make this combination very compelling, these include:

  • Creates a leading global driveline and metal-forming supplier with significant size and scale
  • Comprehensive powertrain-agnostic product portfolio with leading technology
  • Diversified customer base with expanded and balanced geographic presence
  • Compelling industrial logic with approximately $300 million synergies
  • High margins with strong earnings accretion, cash flow and balance sheet

Strong Financial Profile and Balance Sheet
On a 2023 non-adjusted basis, the combined company generated approximately $12 billion in annual revenue. AAM expects the transaction to have high earnings accretion in the first full year following the close of the transaction. The cash portion of the consideration will be funded through a combination of cash on hand and debt. The transaction is expected to be approximately net leverage neutral at closing (before synergies). The combined company’s improved financial profile and free cash flow generation are expected to support investment in future growth initiatives and accelerate leverage reduction in the near term, while targeting a more balanced capital allocation policy below 2.5x net leverage.

Governance and Leadership
The transaction has been unanimously approved by the boards of directors of AAM and Dowlais. Following the close of the transaction, the combined company will be headquartered in Detroit, MI and will be led by David C. Dauch, AAM’s Chairman and CEO.

Effective as of the closing of this transaction, two independent directors of Dowlais, Simon Mackenzie Smith and Fiona MacAulay, are expected to join the board of the combined group.

In addition, four Dowlais executives will be invited to join the AAM executive leadership team.

Transaction Structure
The combination is expected to be effected by means of a Court-sanctioned scheme of arrangement between Dowlais and its shareholders under Part 26 of the Companies Act 2006, although AAM reserves the right to elect to implement the combination by way of a takeover offer (as defined in Chapter 3 of Part 28 of the Companies Act 2006). The transaction is anticipated to close by the end of 2025, subject to approval by both sets of shareholders, regulatory approvals and satisfaction of customary closing conditions. Committed financing is in place to support the transaction.

Upon completion, AAM will continue to trade on the New York Stock Exchange under the ticker symbol “AXL” and the new AAM shares will be authorized for primary listing on the New York Stock Exchange subject to official notice of issuance. Applications will be made to the London Stock Exchange to cancel trading in Dowlais shares on the Main Market of the London Stock Exchange, and to the UK Listing Authority to cancel the listing of Dowlais shares on the Official List, in each case with effect from or shortly following the effective date.

The UK Takeover Code Rule 2.7 Announcement, a copy of this press release and further information can be found at the dedicated transaction microsite, www.aam.com/investors/offer-for-Dowlais-Group-plc.

Preliminary Full Year 2024 Financials
AAM provided preliminary unaudited full year 2024 estimated results:

  • AAM is estimating sales in the range of $6.10 – $6.15 billion.
  • AAM is estimating Adjusted EBITDA in the range of $740 – $750 million.
  • AAM is estimating Adjusted free cash flow in the range of $220 – $230 million.

The foregoing estimated financial results for the fiscal year ended December 31, 2024 are preliminary, unaudited and represent the most recent current information available to AAM and its management. AAM’s actual results may differ from these estimated financial results, including due to the completion of its financial closing procedures and final adjustments.

Conference Call Information
AAM will conduct a conference call and webcast at 8:00 a.m. ET on Wednesday, January 29, 2025 to discuss the proposed transaction. Interested participants may listen to the live conference call by logging onto AAM’s investor website at investor.aam.com or by calling +1 (877) 883-0383 from the United States or +1 (412) 902-6506 from outside the United States. When prompted, callers should enter conference reservation number 1760312.

A replay will be available one hour after the call is complete until February 5 by dialing +1 (877)-344-7529 from the United States or +1 (412)-317-0088 from outside the United States. When prompted, callers should enter conference reservation number 6265092. A written transcript of the call will be posted on the AAM’s investor website and the briefing audio will be archived on AAM’s investor website for one year.

The investor presentation slides related to this transaction and to be referenced during the call can be found on AAM’s investor website at www.aam.com/investors/offer-for-Dowlais-Group-plc prior to the conference call.

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