Dowlais has agreed to a takeover proposal set out by American Axle & Manufacturing Holdings (AAM), in a deal valued at £1.16bn.

The UK car parts manufacturer said the combined group will be a "larger, diversified global manufacturer well-positioned for long-term profitable growth, value-enhancing investments and sustainable capital returns".

Under the deal, Dowlais shareholders will receive 0.086 new AAM share, 42p in cash and up to 2.8p in the form of a final cash dividend to be paid prior to completion.

Currently, Dowlais operates across the Americas, Europe and Asia, employing over 30,000 people across its 70 manufacturing facilities, seven global innovation centres and its joint ventures.

Under the deal, the firm will remain trading in New York, meaning Dowlais will become the latest firm to leave the London Stock Exchange after last year’s record number of departures from the stock market.

The board at Dowlais has recommended that its shareholders vote in favour of the deal.

Chair at Dowlais, Simon Mackenzie Smith, said: "The Dowlais board is unanimous in its view that the proposed combination with AAM offers a compelling opportunity to unlock value for our shareholders. The strategic rationale for the combination is clear: together, we create a global leader with enhanced financial strength, broader diversification and a market-leading product portfolio that spans traditional and electrified powertrain solutions.

“Whilst the Dowlais board remain confident in our stand-alone strategy, this transaction creates significant shareholder value while ensuring that our outstanding businesses continue to shape the future of mobility."

Investment director at AJ Bell, Russ Mould, said the move has "come out of the blue" as Dowlais hadn’t been put for sale. However, he stated that the move was "inevitable when an industry down into a downturn as operators look to combine forces".

He concluded: "This is far from a done deal and there is a real chance that Dowlais shareholders push back for a better offer. The fact the shares only traded at 73.8p versus an implied 85.2p takeout price (which includes up to 2.8p dividend) suggests the market doesn’t believe the deal will succeed in its current form.

"Dowlais’ share price might have gone in reverse for much of its short life as a listed entity, but it has been moving upwards since last November which suggests investors were starting to gain more confidence in the business. They may not want to see it join forces with a US-listed company at this fork in the road."

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