US-based Alcoa is to buy UK component maker Firth Rixson for $2.85 billion (£1.7 billion) from the Oak Hill Capital Partners private-equity group, which bought the Sheffield-based company from Carlyle for £945 million towards the end of 2007.

The New York aluminium giant will pay $2.35 billion in cash and $500 million in shares for Firth Rixson, which makes jet-engine parts (such as seamless rolled rings) from nickel-based super-alloys and titanium.

Its products are also sold to the oil and gas industry and manufacturers of gas turbines. Alcoa will add $150 million to the deal, if the company meets agreed performance targets.

Alcoa forecasts that buying Firth Rixson will increase its annual aerospace revenues by 20% to $4.8 billon. The Yorkshire firm’s sales are predicted to rise 12% per year until 2019, with about 70% of the growth coming from long-term agreements.

Alcoa chairman Klaus Kleinfeld said: “The acquisition of Firth Rixson is a major milestone in Alcoa’s transformation. It will bring together some of the greatest innovators in jet-engine component technology and will significantly expand our market leadership and growth potential.”

Alcoa, which expects to close the deal by the end of this year (subject to regulatory approval), has been investing in its manufacturing operations in recent years, while closing unprofitable smelters because of the world-wide glut of raw aluminium.

Alcoa is expanding a Virginia plant that makes components for jet engines and is spending $100 million on a new engine-parts factory in Indiana. Later this year, it
will begin production at a new $90 million aerospace-alloys plant, also in Indiana.

Josh Sullivan, an analyst at the Sterne Agee & Leach investment group in New York, said: “Alcoa’s strong aerospace positioning is under-appreciated. We therefore view this transaction as both highly accretive and helping to raise Alcoa’s aerospace profile.”