The deal will expand Alcoa's aerospace segment and boost the aluminum giant's production of nickel and titanium goods.
Stubbornly low aluminum prices have been weighing on Alcoa, and the company has been pushing to expand its more profitable downstream businesses, which sell products like truck wheels and aircraft fuselages instead of low-margin, less-processed metal.
Alcoa said it will pay $2.35 billion in cash, plus $500 million of stock, and an additional $150 million potential earn-out.
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The company said the deal will increase Alcoa's 2013 pro forma aerospace revenue by 20 percent to $4.8 billion. The acquisition is expected to contribute $1.6 billion in revenue and add $350 million in earnings before interest, taxes, depreciation and amortization in 2016.
The deal is expected to close by the end this year.
Shares of Alcoa were higher in premarket trading following the announcement.
The company said it has secured interim financing for the deal from Morgan Stanley, and will issue "a prudent combination'' of debt and equity. It expects the takeover to boost its aerospace revenue by 20 percent, to some $4.8 billion a year, but sees no impact on earnings until the second year.
-By CNBC, with Reuters