Dauch (DCH) Business Combination summary

Deal rationale and strategic fit

• Creates a leading global driveline and metal forming supplier with enhanced size, scale, and a powertrain-agnostic product portfolio, diversifying the customer base and geographic presence.

• Combines complementary strengths in axles, beam axles, sideshafts, powder metallurgy, and technological expertise, supporting ICE, hybrid, and EV markets.

• Reduces GM concentration from 40% to 25% and North American dependence from 73% to 54%.

• Establishes a robust business model, accelerating value creation and supporting long-term profitable growth, especially in China and Europe.

• Leadership team will be blended, with two Dowlais directors and four executives joining the board and executive team.

Financial terms and conditions

• Transaction valued at approximately $1.44 billion in cash and AAM shares, with Dowlais shareholders receiving 0.0863 new AAM shares, 42 pence per share in cash, and up to 2.8 pence final dividend per share.

• Implies a 25% premium to Dowlais' closing price on January 28, 2025, and a 45% premium to the three-month VWAP.

• AAM shareholders will own about 51% and Dowlais shareholders about 49% of the combined group.

• Combined revenue expected to be ~$12 billion, with an adjusted EBITDA margin of ~14% including synergies.

• Fully committed financing in place, including $2.2 billion of new debt; net leverage expected to be neutral at closing before synergies.

Synergies and expected cost savings

• Approximately $300 million in annual run-rate cost synergies targeted, with substantial realization by year three post-close.

• Synergies will come from SG&A reductions, purchasing efficiencies, operational improvements, and footprint optimization.

• Estimated costs to achieve synergies are about one year of savings, front-loaded over the first two years.

• Additional synergy opportunities may be identified post-close, especially in operational footprint consolidation.

• High earnings accretion anticipated in the first full year post-close.