In a significant move within the automotive industry, American Axle & Manufacturing Holdings Inc., a prominent producer of drivetrain components including crucial Axel Car Parts, has agreed to merge with UK-based Dowlais Group Plc. This transatlantic deal, valued at approximately £1.16 billion ($1.44 billion), marks a pivotal moment for both companies and the broader market for axel car parts.
The terms of the agreement, announced on Wednesday, reveal a substantial 25% premium over Dowlais’s share price from January 28. Upon completion, American Axle shareholders will hold a 51% majority stake in the newly combined entity, while Dowlais shareholders will control the remaining portion. The merger is projected to yield cost synergies of around $300 million, promising enhanced operational efficiency and market competitiveness in the axel car part and drivetrain component sectors.
This transaction stands out as the largest US-to-UK deal announced this year, underscoring the growing trend of transatlantic consolidation. Dowlais’s shares experienced an immediate surge, climbing as high as 13% in London trading on Wednesday, briefly pushing the company’s valuation close to £1 billion. However, the stock remains down approximately 19% over the past year, highlighting the pressures faced by automotive suppliers in a rapidly changing industry.
Image alt text: Stock performance of Dowlais Group Plc showing a 13% increase following the announcement of the merger with American Axle, a key manufacturer of axle car parts.
The merger announcement arrives at a time when renewed transatlantic dealmaking is anticipated, fueled by recent political developments and a focus on strengthening economic ties between the US and UK. For American Axle, headquartered in Detroit, the heart of the US auto industry, this merger represents a strategic response to evolving industry dynamics. The company, a long-time supplier of drivetrain components and axel car parts to major automakers, has been navigating increasing challenges posed by the automotive industry’s accelerating shift towards electric vehicles (EVs).
Dowlais Group, established in 2023 following its spin-off from Melrose Industries Plc (formerly GKN Automotive), brings its own expertise in drivetrain technology to the merger. Melrose Industries had acquired GKN, a British aerospace and automotive firm, in 2018 before separating its businesses, leading to the creation of Dowlais. This history reveals a pattern of strategic restructuring within the automotive supply chain, particularly concerning companies specializing in components like axel car parts.
The transition from combustion engines to electric and hybrid powertrains is intensifying pressure on traditional automotive suppliers. Drivetrain manufacturers like American Axle and Dowlais, both significant players in the axel car part market, along with competitors such as Dana Inc., have been exploring consolidation as a strategy to achieve greater scale and reduce operational costs. This merger exemplifies this trend, aiming to create a stronger, more resilient entity in the face of industry disruption.
Notably, Melrose had previously considered a combination of its GKN Automotive unit with American Axle in 2022, indicating a long-standing strategic interest between the companies. American Axle has also engaged in discussions with other industry participants, including BorgWarner Inc. and Dana, regarding potential collaborations or asset transactions. These interactions underscore the ongoing consolidation pressures within the automotive supply sector and the strategic importance of scale for axel car part and drivetrain component manufacturers.
Dana Inc., another automotive supplier based in Ohio, was reported in October to be exploring the sale of its off-highway business, reflecting the broader challenges faced by suppliers amid fluctuating market demands. American Axle’s stock has experienced a decline of over 30% in the past year, and was down 5% at 10:24 a.m. in New York, resulting in a market valuation of $649 million. These figures illustrate the financial pressures within the sector, further motivating strategic moves like the merger with Dowlais.
Dowlais received financial counsel from Barclays Plc and Rothschild & Co., while JPMorgan Chase & Co. served as the financial advisor to American Axle in this significant transatlantic automotive deal. This merger signals a major realignment in the axel car part and drivetrain component industry, as two established players join forces to navigate the evolving landscape of automotive manufacturing and the shift towards electrification.
