Aluminum-maker Alcoa Inc. announced Tuesday it is acquiring Cordant Technologies Inc., the parent of Thiokol Propulsion, for $2.3 billion in cash.
The announcement cured a Cordant stock slump with shares at $55.56 early Wednesday after trading between $30-35 since November. Alcoa opened Tuesday at $62.69, up from Tuesday's close of $61.25.Cordant employees in the corporate offices in Salt Lake City were told of the pending acquisition first thing Tuesday morning.
Lauren Sides, Cordant's manager of corporate public affairs, said it is too early to know what effects the acquisition will have on Cordant's work force, adding that there is no indication Thiokol will see cutbacks. "We anticipate there will be redundancies at the corporate office, so there will probably be some exits here," she said.
Cordant has 110 people in its corporate office and employs 17,000 workers worldwide in three business groups: Thiokol, Howmet Castings and Huck Fasteners. Thiokol, the Utah maker of solid-rocket propulsion systems such as the space shuttle booster rockets, is Cordant's best-known group.
Cordant acquired an 85 percent stake in Howmet in February 1999, employing 10,800 with revenues of about $1.4 billion making titanium components for jet aircraft and power generation and cast aluminum parts for aerospace and commercial customers.
Huck Fasteners employs 2,500 and had 1999 sales of about $465 million.
Alcoa is the world's largest maker of aluminum. It has 107,000 employees with 1999 revenues of about $16 billion.
"I think what we can say is that Alcoa and Cordant are in similar markets and have similar customers, though their products are different," Sides said. "Boeing and Ford Motor Co. are very important customers to both companies. Both our board and our senior management felt there were similarities that made this a good fit."
The boards of directors of both companies have already approved the merger. As part of the merger, Alcoa will assume $685 million in debt from Cordant.
Alcoa is also in the midst of merging with No. 3 aluminum-maker Reynolds to
compete with the pending merger of Zurich-based Alusuisse-Lonza (Algroup), Pechiney of France and Alcan Aluminum of Canada. European regulators said Tuesday they would only consider a combination of Alcan and Alusuisse, the Alcan-Pechiney proposal was withdrawn.
An Alcoa-Reynolds-Cordant combination would employ about 143,000 people have have $23.5 billion in revenue, based on 1999 sales. The Algroup-Pechiney-Alcan combination would have have sales of about $21.6 billion.