American Axle & Manufacturing Holdings (AAM) has entered into a definitive agreement to sell its U.S. iron casting operations (Grede) to funds managed by Gamut Capital Management for an aggregate purchase price of $245 million, subject to certain customary adjustments.
Across 10 manufacturing facilities, Grede develops, manufactures, assembles and supplies ductile, gray and specialty iron castings and machined components for automotive, commercial vehicle and industrial markets. For the full year 2018, Grede generated $781 million in sales ($741 million excluding intercompany transactions).
“The sale of Grede will enable us to streamline our business, accelerate our debt reduction initiatives and enhance our margin profile,” said AAM’s Chairman and CEO, David Dauch. “We will continue to optimize and invest in our highly-engineered product portfolio, focus on profitable growth opportunities including electrification, and further strengthen AAM’s value proposition to all key stakeholders.”
Jordan Zaken, founding partner of Gamut, said, “Grede is a market-leading supplier of high-performance, mission-critical castings with national scale, a blue-chip customer base and significant opportunities for growth. We are excited to partner with Grede and its dedicated employee base in its next chapter as an independent company focused on operational excellence and best-in-class delivery for its customers.”
AAM will retain its El Carmen, Mexico, iron casting operations. The El Carmen Manufacturing Facility will continue to provide significant vertical integration benefits to AAM, while also continuing to serve external customers in Mexico and other global markets.
The $245 million sale price will consist of $185 million in cash and a $60 million deferred payment obligation, subject to certain customary adjustments. Net cash proceeds will primarily be used to repay outstanding indebtedness.
The transaction is expected to close in the fourth quarter of 2019, subject to customary closing conditions, including the receipt of regulatory approvals.