£1.16bn merger to form global automotive powerhouse

Engineering giant Dowlais, which was formed via Melrose Industries’ demerger of its GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen arms, is set to merge with American Axle Manufacturing (AAM) in a £1.16bn ($1.44bn) deal.

The cash-and-share agreement will create a “leading global manufacturer” with 51,000 employees, projected annual revenues of $12bn and cost synergies of $300m by the end of the third year after completion.

New York-listed AAM is a Detroit-based global supplier with 75 facilities across 16 countries. The manufacturer specialises in driveline and metal-forming technologies for electric, hybrid, and internal combustion vehicles, with around 21,000 employees across the world.

AAM has the largest automotive forging operations worldwide, contributing to net sales of $6.08bn in 2023.

Dowlais focuses on advanced engineering for the automotive industry through its two subsidiaries, GKN Automotive and GKN Powder Metallurgy, both headquartered in Birmingham. The spinoff from Melrose now services more than 90% of global automotive OEMs, operates 70 manufacturing facilities globally and employs around 30,000 people.

Following completion, it is expected that the Dowlais shareholders will own 49%, and AAM shareholders will own 51%.

Melrose demerged its GKN Automotive, Powder Metallurgy and Hydrogen businesses to become a pure-play aerospace company almost two years ago, leading to the creation of Dowlais as a standalone London-listed group.

Dowlais disposed of its GKN Hydrogen business to Langley Holdings, an engineering and industrial manufacturing group headquartered in Nottinghamshire last August to become an automotive-focused business. 

David C. Dauch will serve as the Chairman and Chief Executive Officer of the Combined Group. Roberto Fioroni (Chief Financial Officer, Dowlais), Helen Redfern (Chief People, Sustainability and Communications Officer, Dowlais), Markus Bannert (Chief Executive Officer, GKN Automotive), and Jean-Marc Durbuis (Chief Executive Officer, GKN Powder Metallurgy) will be invited to join existing AAM executives as part of the senior executive management team of the combined group, in roles to be confirmed.

It is also expected that Simon Mackenzie Smith (Chair, Dowlais) and Fiona MacAulay, who currently serve on the Dowlais Board, will join the Board of AAM.

Liam Butterworth, CEO of Dowlais, said: “Today’s announcement marks a significant opportunity to build on the success of Dowlais Group. The combination of the two companies accelerates the execution of our strategy by leveraging our combined scale, resources, capabilities, and outstanding management teams. Our product portfolios and technological expertise are highly complementary, positioning us to better serve our customers and exceed their expectations.

“This transaction also combines our respective strengths in innovation, technology, and talent, creating a solid foundation for delivering long-term value to our shareholders. Our shared vision is to be a leading supplier of power-agnostic products as the world transitions to electrified mobility while maintaining operational excellence and driving sustainable growth, improved margins, and stronger cash flow generation. Together, we will unlock significant synergies, accelerate innovation, and position the combined group for long-term success in a dynamic industry. I am incredibly proud of what our team has achieved and excited about the opportunities that lie ahead for the combined group.”

Dowlais directors intend to recommend unanimously that shareholders vote in favour of the merger.