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UPDATE 2-American Axle's $1.6 bln Metaldyne buy to help grow beyond GM

Published 2016-11-03, 11:24 a/m
© Reuters.  UPDATE 2-American Axle's $1.6 bln Metaldyne buy to help grow beyond GM
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* Combined company to have about $7 bln in annual sales

* Metaldyne shareholders to own 30 pct of new entity

* Deal expected to close in first half of 2017 (Adds details, shares)

By Ankit Ajmera

Nov 3 (Reuters) - U.S. auto-parts maker American Axle & Manufacturing Holdings Inc AXL.N agreed to buy Metaldyne Performance Group Inc MPG.N for about $1.6 billion in a cash-and-stock deal, a move that would help lower its dependence on General Motors Co (NYSE:GM) GM.N .

Shares of Detroit-based American Axle, which was spun off from GM in 1994, were down 15.6 percent at $14.01, while Southfield, Michigan-based Metaldyne's shares were up 42 percent $20.30.

Under the terms of the deal, Metaldyne share holders will get $13.50 in cash and half of an American Axle share, or a total of $21.81 per share, a premium of 52.5 percent to Metaldyne's Wednesday's close.

The deal, American Axle's biggest ever, will additionally include the assumption of $1.7 billion of Metaldyne's debt, the companies said.

Ford Motor (NYSE:F) Co F.N was Metaldyne's biggest purchaser of auto parts, with almost a quarter of its 2015 sales.

The deal, which is expected to close in the first half of 2017, would help American Axle grow beyond GM, which accounted for two-third of its 2015 sales and make Ford one of its major customers.

Metaldyne and American Axle make complementary products, including components for use in powertrain and drivetrain applications for vehicles, that transfer power from the transmission to the wheels.

The deal comes as motor vehicles sales in the United States hit a plateau after reaching a record in 2015, which also marked the peak of a recovery from the 2008-2009 economic crisis.

Automakers have said pent-up demand from the recession has been satisfied.

The combined company will have annual sales of nearly $7 billion, on a pro-forma basis, behind Borgwarner Inc's BWA.N 2015 sales of about $8 billion and Canada-based Magna International Inc 's MG.TO 2015 annual sales of about $32 billion.

American Axle shareholders will own about 70 percent of the combined company, and Metaldyne shareholders will own the remaining, the companies said.

Private-equity firm American Securities LLC, the controlling stockholder of Metaldyne, will own 23 percent of the new company and appoint three of its directors, expanding the size of the board to 11.

The deal would result in cost savings estimated to be between $100 million to $120 million by 2018.

Greenhill & Co LLC and J.P. Morgan advised American Axle on the deal, while BofA Merrill Lynch advised Metaldyne. (Editing by Martina D'Couto and Shounak Dasgupta)

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