American Axle & Manufacturing Holdings Inc. on Wednesday said it's acquiring a public United Kingdom-based automotive parts company in a $1.44 billion cash-and-stock deal.

The Detroit-based drivetrain components supplier's acquisition of Dowlais Group plc will offer more production scale, the companies said in a joint news release, as the auto industry undergoes a historic and bumpy transformation toward electric vehicles. Their automaker customers are demanding cost savings as the threat of low-cost products from China looms, prompting industry consolidation. American Axle expects $300 million in cost savings by the end of the third year.

AAM's headquarters will remain in Detroit with David Dauch, its chairman and CEO, continuing in his role. AAM shareholders will hold 51% of the combined entity, and Dowlais investors will receive 49%. On a non-adjusted basis, the combined company would've generated approximately $12 billion in annual revenue in 2023.

The agreement represents a premium of around 25% of Dowlais’ closing share price on Tuesday, according to the terms released Wednesday. American Axle shares were falling 3% in morning trading on Wednesday to $5.64.

The deal is expected to close this year, hinged upon shareholder and regulatory approvals in the European Union, United States and China, where Dowlais operates a joint venture.

“This announcement marks another key milestone in our continued long-term strategic growth plan,” Dauch said in a statement. “We are excited to bring together these two outstanding companies to create a leading driveline and metal-forming supplier serving the global automotive industry as it continues to evolve. The combination will create significant immediate and long-term shareholder value while helping to power a more sustainable future. Together with Dowlais, we will have the powertrain-agnostic product portfolio, global reach, commitment to innovation and financial strength to meet the needs of customers and succeed in a dynamic market environment.”

American Axle and Dowlais' GKN Automotive produce automotive parts that support gas- and diesel-powered engines, hybrid propulsion systems and electric powertrains.

Two independent directors of Dowlais, Simon Mackenzie Smith, its current chair, and Fiona MacAulay, will join AAM's board. Four Dowlais executives also will receive job offers to join the AAM executive leadership team.

AAM also is estimating 2024 annual sales for its business alone in the range of $6.1 billion to $6.15 billion and adjusted earnings before interest, taxes, depreciation and amortization in the range of $740 million to $750 million.

AAM separated from General Motors Co. through the acquisition of several driveline and forging operations by an investment group led by Dauch's late father, Richard Dauch.

Dowlais is a 2023 spinoff of investment company Melrose Industries Plc. It renamed its drivetrain technology supplier previously known as GKN Automotive. In a hostile takeover, Melrose bought the British aerospace and automotive company GKN in 2018 before separating the businesses.

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