Alcoa CEO: We Can Grow RTI's Business And At Same Time Increase Profitability

Alcoa Inc AA announced on Monday that it would be acquiring fabricated titanium manufacturer RTI International Metals, Inc. RTI in a $1.5 billion deal. Following the announcement, shares of RTI International opened 40 percent higher, whereas Alcoa's stock opened significantly lower.

Klaus Kleinfeld, Alcoa CEO, was on CNBC following the announcement to discuss the deal.

Advantages Of The Deal

"Why this is a good deal? I mean, on the one hand we are expanding our value ad business. Secondly we are expanding it in an area - aerospace - that is high growth," Kleinfeld said. "This year we believe large commercial aircrafts are going to grow 15 percent. Overall we see in the next year's 5 to 6 percent annual growth rate, nine years of auto backlog. Fantastic. It gives us access to more titanium."

"We are closing the value ad chain and we now have the complete mid and downstream Titanium offering, plus machining in there, right? Then it also allows us to get access to some very foundational, additional technology, Tialuminides, 3D manufacturing, very, very good."

Increasing RTI's Profitability

He continued, "And on top of it, we can bring some of the good practices that we call Alcoa advantages to RTI and make this a better firm. We believe we can grow it from what today it is a $800 million business and to 2019 to $1.2 billion business and at the same time increase the profitability from 14.5 to 25 -- that's in essence what it is."