AAM and Dowlais Combine for $1.44 Billion in Cash and Stock

In a strategic move that signals confidence in the future of the automotive industry, American Axle & Manufacturing (AAM) has announced a combination with Dowlais Group for $1.44 billion in cash and stock. This merger, valued at 85.2 pence per Dowlais share, represents a 25% premium to the Closing Price of 68 pence for each Dowlais Share as at the close of business on 28 January 2025. The combined entity will be a larger, diversified global manufacturer, well-positioned for long-term profitable growth, value-enhancing investments, and sustainable capital returns.

The Combined Group will have a leading, innovative global driveline and metal forming supplier with significant size and scale. With an increasingly propulsion-agnostic portfolio of products across a broader range of automotive segments supporting internal combustion engine, hybrid, and electric powertrains, the Combined Group will be able to adapt to changing market demands and capitalize on emerging opportunities in the automotive industry.

The diversified customer base of the Combined Group, spanning multiple geographies and automotive segments, will enable it to better serve a diverse range of customers and support the changing propulsion trends in the automotive industry. The expanded and balanced geographic presence of the Combined Group will allow it to navigate the evolving automotive market more effectively and capitalize on growth opportunities.

The merger is expected to deliver approximately $300 million in annual run rate cost synergies across the Combined Group. These synergies will be achieved through operational efficiencies, streamlining the combined organization, and leveraging the strengths of both companies. High earnings accretion is anticipated in the first full year following the close of the transaction, indicating that the cost synergies will have a significant positive impact on the Combined Group's financial performance.

The Combined Group will have a strengthened cash flow profile and balance sheet, which will accelerate deleveraging and shareholder value creation. The combined entity will have high margins, strong earnings accretion, cash flow, and balance sheet, enabling it to make value-enhancing investments and deliver sustainable capital returns to shareholders.

The experienced and blended management and leadership team of the Combined Group, with a proven track record of restructuring, integration, and operational excellence, will be well-positioned to lead the company through the transitioning automotive industry and capitalize on emerging opportunities. The Combined Group will have a diversified product portfolio and customer base, positioning it to capitalize on the evolving automotive market, particularly the shift towards electric vehicles.

In conclusion, the strategic combination of AAM and Dowlais is expected to create long-term shareholder value through expanded product portfolios and geographic presence, cost synergies, financial strength, talent and innovation, and a premium valuation. This merger will enable the Combined Group to establish itself as a global leader in driveline and metal forming technologies, ready to navigate and innovate within a transitioning automotive industry.