Kennametal Inc. agreed to acquire Allegheny Technologies Inc.’s Tungsten Materials business units for $605 million. Tungsten Materials is an integrated manufacturing organization, with 14 operations in two ATI divisions – ATI Firth Sterling, in Madison, Ala., and ATI Stellram, with operations in the U.S., U.K., and Switzerland -- producing tungsten metallurgical powders, as well as tooling technologies, and components for aerospace and energy markets.

The transaction is already approved by directors of both companies and is expected to close before year’s end, subject to customary regulatory approvals and closing conditions.

Tungsten -- one of the densest all elements -- is used industrially as a hardening alloy in specialty or tool steels. Tungsten-alloy products represent up to 80% of Kennametal's sales, chairman Carlos Cardoso estimated. The ATI Tungsten Materials Business posted annual sales of approximately $340 million in 2012.

“ATI’s Tungsten Materials Business brings vital strategic assets that are an excellent complement to Kennametal, especially given our common focus on operational excellence and industry-leading material science,” the Kennametal chairman stated. “The addition of the expanded material and tooling technologies of ATI’s Tungsten Materials Business will enable us to offer more to our customers around the world.”

Kennametal said the purchase is in line with its “growth strategy” and would diversify its portfolio.

At the same time, it helps Kennametal to diversify its tungsten sourcing, to balance supplies, costs, and access to raw materials, including recycled products. 

Futhermore, the acquisition improves Kennametal’s metal cutting and metal finishing product offerings, specifically via brands like Stellram, Garryson and Landis. 

Kennametal estimated the acquisition would generate cost synergies ranging from $30 million to $40 million via productivity improvements, operational efficiencies, and raw-material cost benefits. 

Kennametal will manage sales of ATI’s Tungsten Materials Business globally through its existing sales channels.