Fortescue (ASX:FMG) share price slides on $310 million acquisition

Analysts expect more merger and acquisition announcements from ASX companies.

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Key points

  • Fortescue to acquire Williams Advanced Engineering for approximately AU$310 million
  • Fortescue Future Industries (FFI) to manage the integrated company
  • Collaborative effort to create battery electric solutions to decarbonise mining operations

The Fortescue Metals Group Limited (ASX: FMG) share price is down 1.43% in morning trade.

Following another day of heavy selling in US markets on Friday, the S&P/ASX 200 Index (ASX: XJO) is also selling off, down 0.47%. 

Below we take a look at the ASX 200 miner’s acquisition announcement.

What acquisition was reported?

The Fortescue share price is edging lower after the company reported it’s entered into a share sale and purchase agreement to acquire 100% of Williams Advanced Engineering Limited (WAE).

WAE is currently held by EMK Capital and Williams Grand Prix Engineering Limited. The acquisition cost was reported at £164 million (approximately AU$310 million).

WAE, a technology and engineering services business, works with Tier 1 customers in advanced engineering in the premium automotive and motorsports sectors. Calendar year 2021 revenue for the business came in at approximately US$84 million.

Fortescue said that WAE’s technology and expertise in high-performance battery systems and electrification will aid its efforts to decarbonise its mining operations alongside launching a new business growth opportunity.

Upon completion of the acquisition, the company will be managed by Fortescue Future Industries (FFI). The combined team will work to develop battery electric solutions for Fortescue’s rail, mobile haul fleet and other heavy mining equipment. Fortescue expects to announce details on the first major collaborative project, a battery electric train concept, within the next few months.

Commenting on the acquisition, Fortescue’s founder, Andrew Forrest said:

FFI and WAE will work together to decarbonise Fortescue – and in turn the global heavy industry and hard to abate sectors – for the good of our planet, and the benefit of our shareholders.

Today’s announcement builds on our commitment to remove fossil fuel powered machinery from our operations and to replace it with zero carbon emission technology, powered by FFI green electricity, green hydrogen and green ammonia.

Fortescue’s CEO, Elizabeth Gaines added:

The potential global market for WAE is significant and will extend beyond the decarbonisation of Fortescue, further demonstrating our commitment to the diversification of Fortescue to a renewable energy and resources company.

The transaction is expected to be complete by the end of March 2022, subject to meeting customary conditions precedent, which in this case includes meeting the UK’s foreign investment approval.

Fortescue will fund acquisition from its existing liquidity sources.

Fortescue share price snapshot

The Fortescue share price is up 7% so far in the new year. That compares to a year-to-date loss of 4% posted by the ASX 200.

Over the past 12 months, Fortescue shares are down 15%. 

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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