The manufacturer of metal cutting tools, Kennametal Inc, announced they had agreed to purchase the tungsten materials unit of its supplier Allegheny Technologies Inc. The price for the acquisition was at USD605 million and the goal is to expand its offerings into the aerospace and energy business.

The structure of the acquisition allowed the transaction to be both an asset based and stock purchase exchange. The benefit of this kind of transaction would be a cash tax benefit of nearly USD70 million. This was confirmed by Kennametal from its Latrobe, PA headquarters, with the full expectation of its completion by the end of 2013.

In acquiring the tungsten unit of ATI, Kennametal would expand its portfolio to include counterweights and control services for aerospace manufacturers and other industrial alloys and powders. Aside from expanding access to raw materials, the move would accelerate plans to establish a tungsten carbide recycling facility.

The purchase would also result in a reduction of capital expenditures by at the minimum USD30 million, Kennametal would use its cash and loan available under an existing credit revolver to pay for its tungsten business. According to ATI, the tungsten unit generates annual sales totalling USD240 million.