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AK Steel (AKS) to Buy Precision Partners for $360 Million

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AK Steel has agreed to purchase Precision Partners Holding Company for $360 million in cash. The transaction, which is subject to customary closing and regulatory approvals in the U.S. and Canada, is expected to complete in third-quarter 2017.

Ontario-based Precision Partners is a leading North American automotive market company that offers engineering, tooling, die design and hot and cold stamped steel parts. The entity employs over 1,000 employees across eight plants in Ontario, Alabama and Kentucky and has a highly experienced leadership team.

AK Steel plans to fund the acquisition with debt and equity securities. Credit Suisse is serving as financial advisor to AK Steel on the deal.

The deal combines the steel maker’s innovation in materials and metals-forming and Precision Partners' tooling and stamping technology and advanced capabilities.

The buyout is in sync with AK Steel's commitment to broaden its portfolio of high-value products and processes and also advances the company’s focus on the rapidly growing automotive lightweighting industry and its position in advanced high strength steels. It also reinforces collaboration with the company’s automotive market customers.

AK Steel has outperformed the Zacks categorized Steel-Producers industry over a year. The company's shares have rallied 39.3% during the period while the industry saw a gain of about 35.7%.


AK Steel remains focused on expanding its core automotive business. The company gets a large chunk of its sales from the automotive sector.

AK Steel is also laying importance on de-emphasizing commoditized products and launching new value-added products. As part of this strategy, the company, last year, launched Nexmet – an innovative product range of high-strength steel for use in automotive lightweighting applications. The products are expected to greatly benefit automotive manufacturers and reinstate the company’s focus on innovation and technology for product development.

The company also remains committed to reduce cost amid a persistent challenging operating environment. It is looking for cost saving opportunities in 2017 through a number of means including process improvement, headcount cuts, reduction in process time and procurement activities.

AK Steel currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-placed companies in the basic materials space include Ternium S.A. (TX - Free Report) , The Chemours Company (CC - Free Report) and Kronos Worldwide, Inc. (KRO - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ternium has an expected long-term earnings growth of 18.4%.

Chemours has an expected long-term earnings growth of 15.5%.

Kronos has an expected earnings growth of 354.8% for the current year.

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