American Axle & Manufacturing Holdings, Inc. AXL, a leading supplier of driveline and drivetrain systems, modules and components, has reached an agreement with the board of Dowlais Group plc for a proposed cash and share acquisition of Dowlais’ entire issued and future ordinary share capital, valued at approximately $1.44 billion.
The combination of both companies will bring together essential product portfolios for internal combustion engine, hybrid and electric vehicle manufacturing, while also improving cost efficiency. This transaction will position the newly formed entity to serve a broad and diverse customer base across multiple regions and adapt to evolving propulsion technologies.
As part of the agreement, Dowlais shareholders will receive 0.0863 new AAM shares per Dowlais common stock, along with 42 pence per share in cash and up to 2.8 pence from Dowlais’ full-year 2024 final dividend before the deal closes. Once the transaction is completed, AAM shareholders are expected to hold around 51% of the merged company, while Dowlais shareholders will own approximately 49%.
Using AAM’s closing share price and the exchange rate as of Jan. 28, 2025, the offer, including the final dividend, values each Dowlais share at 85.2 pence, with the total value of its fully diluted share capital estimated at £1.16 billion. This valuation reflects a 25% premium over Dowlais' closing price on Jan. 28, 2025, and a 45% premium compared to its three-month volume-weighted average share price.
Per David C. Dauch, chairman and CEO of American Axle, the transaction is expected to create substantial short- and long-term value for shareholders while contributing to a more sustainable future. The combined company will benefit from an extensive, powertrain-agnostic product lineup, global market presence, strong commitment to innovation and enhanced financial strength, ensuring its ability to meet customer demands and navigate a rapidly evolving industry landscape.
This combination will establish a leading global supplier in driveline and metal forming, with increased scale and a broad technology-driven, powertrain-neutral product portfolio. It will also expand and balance its geographic footprint while diversifying its customer base. The industrial logic behind the deal is compelling, with approximately $300 million in anticipated synergies, strong earnings accretion, high margins, robust cash flow and a solid balance sheet.
In 2023, the combined company generated approximately $12 billion in revenues. AAM expects the transaction to significantly boost earnings in the first full year after completion. The cash portion of the deal will be financed through a combination of cash on hand and debt, maintaining a neutral net leverage position at closing before synergies. The stronger financial profile and cash flow are expected to support future growth investments and accelerate debt reduction while maintaining a capital allocation strategy below 2.5x net leverage.
The boards of directors of both AAM and Dowlais have unanimously approved the transaction, which will result in the new company being headquartered in Detroit, MI, with David C. Dauch continuing as Chairman and CEO. Two independent Dowlais directors, Simon Mackenzie Smith and Fiona MacAulay, will join the board, while four Dowlais executives will take leadership roles within AAM.
The acquisition will be carried out through a Court-sanctioned scheme of arrangement under the UK Companies Act 2006, though AAM reserves the right to pursue an alternative takeover structure if necessary. The transaction is expected to close by the end of 2025, subject to shareholder and regulatory approvals as well as customary closing conditions. Committed financing has already been secured to support the deal.
Upon completion, AAM will continue trading on the New York Stock Exchange (NYSE) under the "AXL" ticker, with the newly issued AAM shares also listed on the NYSE. Meanwhile, Dowlais’ shares will be delisted from the London Stock Exchange and removed from the UK Listing Authority’s Official List shortly after the transaction is finalized.
AXL carries a Zacks Rank #3 (Hold) at present.
Some better-ranked stocks in the auto space are Geely Automobile Holdings Limited GELYY, Yamaha Motor Co., Ltd. YMHAY and Allison Transmission Holdings, Inc. ALSN, While GELYY sports a Zacks Rank #1 (Strong Buy), YMHAY and ALSN carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GELYY’s fiscal 2025 sales and earnings suggests year-over-year growth of 66.62% and 149.31%, respectively. EPS estimates for fiscal 2025 and 2026 have improved by 15 cents and 38 cents, respectively, in the past 30 days.
The Zacks Consensus Estimate for YMHAY’s 2025 sales and earnings suggests year-over-year growth of 8.69%and 19.07%, respectively. EPS estimates for 2025 have improved by a penny in the past 60 days.
The Zacks Consensus Estimate for ALSN’s 2025 sales and earnings suggests year-over-year growth of 6.67% and 11.40%, respectively. EPS estimates for 2025 have improved 3 cents in the past 30 days.
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