Under a new definitive merger agreement, Detroit-based American Axle and Manufacturing Holdings Inc., a manufacturer of automobile driveline and drivetrain components, will acquire Metaldyne Performance Group Inc., a Southfield-based provider of engineered components for use in powertrain and suspension applications.
AAM will acquire MPG for $1.6 billion in cash and stock, plus the assumption of $1.7 billion in net debt. Combined, the two companies employ more than 25,000 workers.
Officials say the combined company will have the power to deliver a wide range of highly engineered components, modules, and sub-systems across multiple engine, transmission, and driveline applications. The combined entity will represent nearly $7 billion of annual sales and have the potential to generate more than $1.2 billion of earnings before interest, taxes, and deprecation, and $400 million of free cash flow after full integration.
“AAM’s transformational acquisition of MPG brings together two complementary Tier 1 organizations to create a company with greater scale and increased diversity across products, customers, and end markets,” says David C. Dauch, AAM’s Chairman and CEO of AAM. “MPG’s expertise in complex, highly-engineered powertrain components and its global footprint will be tremendous assets to AAM.”
Upon closing of the transaction, AAM’s shareholders will own 70 percent of the combined company and MPG’s shareholders will own 30 percent. An affiliate of American Securities LLC, which AAM entered into a voting agreement with, will also own 23 percent of the combined company.
Dauch will continue to serve as chairman and CEO of AAM, which will remain headquartered in Detroit. AAM’s board of directors will also be expanded to 11 members with three designees of American Securities joining AAM’s current board.
MPG produces components and modules for a global customer base of vehicle OEMs and Tier I suppliers. MPG has a global footprint spanning more than 60 locations in 13 countries across North America, South America, Europe, and Asia with 12,000 employees.
AAM manufactures, engineering, designs, and validates driveline and drivetrain systems and related components and modules, chassis systems, electric drive systems, and metal-formed products for light trucks, sport utility vehicles, passenger cars, crossover vehicles and commercial vehicles. The company has 13,000 employees globally.