Precision Castparts Corporation (PCP) entered into an agreement to acquire Primus International (Primus), a renowned provider of complex components and assemblies to the global aerospace industry, including swaged rods, advanced composites, and machined aluminum and titanium components. Employing about 1500 people, Primus has seven manufacturing locations with its headquarter in Bellevue, Washington. The closing of the deal is subjected to regulatory approvals.
The acquisition is scheduled to be completed in the second quarter of fiscal 2012. Further, Primus is expected to add to the earnings of Precision Castparts instantly.
The component manufacturing businesses of Primus complements core expertise. The merger of Primus businesses with Precision Castparts’ present aerostructures businesses will increase collective customer penetration.
Precision Castparts is one of the few manufacturers that can consistently produce the largest and most complex structural investment castings in quantities sufficient to meet customers’ quality and delivery requirements. Its emphasis on low-cost, high-quality products with timely delivery has made it the leading supplier of structural and airfoil castings for jet aircraft and IGT engines, while helping it to expand into the structural airframe and armament markets. The commercial aerospace market cycle is critical to demand for precision investment casting products.
Precision Castparts’ strategy for profitable growth also includes the pursuit of other opportunities for its existing investment casting technology. It has been expanding the application of its investment casting technology in the medical prosthesis, satellite launch vehicle and general industrial markets by manufacturing such products, such as artificial hips and knees, parts for satellite launch vehicles, and impellers for pumps and compressors.
However, the company is subject to substantial competition in all the markets it serves, and expects this competition to continue. As a result, it has made significant long-term price concessions to its customers in the aerospace and power generation markets from time to time, and it expects customer pressure for further long-term price concessions to continue. Maintenance of its market share will depend, in part, on its ability to sustain a cost structure that enables it to be cost-competitive. Major competitors of Precision Castparts are Alcoa Inc. (AA) and Sumitomo Metal Industries Ltd.
Precision Castparts Corp., a manufacturer of complex metal components and products, provides high-quality investment castings, forgings and fasteners/fastener systems for critical aerospace and industrial gas turbine (IGT) applications. The company manufactures complex metal components and products in three principal business segments: Investment Cast Products, Forged Products and Fastener Products.
We continue to maintain a Neutral rating on Precision Castparts, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.
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