Good morning. My name is Rocco and I will be your conference call facilitator today. We welcome you to today's conference call to discuss AAM's combination with Dowlais. All lines have been placed on mute to prevent background noise. After the speaker's remarks, you will have an opportunity to ask questions. If you would like to ask a question during this time, simply press the star key and then the number one on your telephone keypad. If you would like to withdraw your question, please press star then two. As a reminder, today's call is being recorded. I would now like to turn the call over to Mr. David Lim, Head of Investor Relations. Please go ahead, Mr. Lim.
Thank you. Good morning, everyone, and thank you for joining the call and webcast to discuss AAM's combination with Dowlais, as well as an update to our full year 2024 financial outlook. With me on the call today are AAM's Chairman and CEO, David Dauch, and Executive Vice President and Chief Financial Officer, Chris May. Earlier this morning, we issued a press release announcing that AAM has reached agreement with Dowlais on the terms of a recommended combination. You can access this release on our website at www.aam.com or through the PR Newswire services. The investor presentation related to this transaction and reference on this call can be found in the investor relations section of AAM's website. To listen to a replay of this call, dial 1-877-344-7529 or 412-317-0088. Replay access code 6265092. This replay will be available beginning today through February 5th.
Now, before we begin, I'd like to remind everyone that the matters discussed in this call may contain comments and forward-looking statements that are subject to risks and uncertainties which cannot be predicted or quantified, and which may cause future activities and results of operations to differ materially from those discussed. For additional information, please reference slide two of our investor presentation or the press release that was issued today related to this proposed transaction. Also, during this call, we may refer to certain non-GAAP financial measures. Information regarding these non-GAAP measures, as well as a reconciliation of the non-GAAP measures to GAAP financial information, is available in the presentation.
Today's call is not intended and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy securities of AAM or Dowlais in any jurisdiction where such offers or solicitations are not permitted by law. The subject matter of today's call will be addressed in a proxy statement that will be filed with the SEC. Investors should read the information in the proxy statement in its entirety when it becomes available. Information regarding the participants and the proxy solicitation is contained in AAM's case, in AAM's annual proxy materials, filed with the SEC, and in Dowlais's case, in Dowlais's equivalent filings and announcements made in accordance with applicable U.K. law. With that, let me turn things over to AAM's Chairman and CEO, David Dauch.
Thank you, David, and good morning, everyone.
Today, American Axle & Manufacturing is pleased to announce that it has reached an agreement with the board of the Dowlais Group on the terms of a recommended cash and share offer to be made by AAM for the entire issued and to be issued ordinary share capital of Dowlais for approximately $1.44 billion in cash and AAM shares. This compelling strategic combination brings together two complementary global Tier 1 suppliers to create one of the leading global driveline and metal forming companies in the world. This combination will have greater size and scale, a comprehensive powertrain agnostic product portfolio deeply rooted in technology, and a more diverse and expanded customer mix and geographic presence.
AAM's position in axles, combined with Dowlais's strength in side shafts, our mutual capability in all-wheel drive systems and electrification, and our combined expertise in forging, castings, and powder metal, supported by a strong vertical integration capability, positions the combined group with a strong growth profile. And if that was not exciting enough, this strategic combination is expected to deliver approximately $300 million of synergies. We expect run rate savings will be substantially achieved by the third year after the deal closes. The acquisition positions AAM for high margin potential, strong earnings accretion, strong cash flow, and a strong balance sheet. Simply, AAM plus Dowlais creates a more balanced, a more resilient company with a robust business model to accelerate growth and value creation for all shareholders. The details of the transaction are on slide four of our presentation deck.
Under the terms of the agreement, Dowlais shareholders will be entitled to receive for each share of Dowlais common stock, 0.0863 shares of new AAM common stock, GBP 0.42 per share in cash, and up to GBP 0.028 Dowlais full year 2024 final dividend prior to closing. This deal implies a multiple of approximately 4.1 times based on 2023 Adjusted EBITDA without synergies, and a multiple of approximately three times with synergies. In our view, behind every great company are great people, and Dowlais is no exception across all levels. My focus as Chairman and CEO is to blend the talents of both companies to create a robust organization across all levels. From a governance and a leadership perspective, we plan to expand the AAM board of directors by adding two independent directors from Dowlais, Simon Mackenzie Smith, the current chair of Dowlais, and Fiona MacAulay.
We welcome both Simon and Fiona, and we look forward to leveraging their knowledge, insight, and deep experience to help navigate a path for AAM's continued success. In addition, I'm very pleased to announce we have invited four Dowlais executives to join AAM's executive leadership team. Finally, we estimate the transaction to close by year-end, subject to shareholder and regulatory approvals, as well as customary closing conditions. Now let's discuss the financial benefits of the combination. On slide five, you can see the size, scale, and financial opportunities very clearly. On a non-adjusted combined basis, revenues will approximate $12 billion. Combined adjusted EBITDA margin, including synergies, is approximately 14%, and we anticipate day one net leverage after the impact of the transaction financing of approximately 2.5 times, including synergies. Following the close of the transaction, we expect strong earnings accretion in the first full year.
On slide six, let me provide you with a brief overview of the Dowlais Group. They are a market-leading high-technology engineering group, which is comprised of two operating business units, GKN Automotive and GKN Powder Metallurgy. GKN Automotive is a leader in the development and production of side shafts, prop shafts, all-wheel drive systems, eDrive systems, and ePowertrain components, and is a trusted partner to over 90% of the global automotive OEMs. GKN Powder Metallurgy is a global leader of high-performance and precision powder metal products for the automotive and industrial markets. Simply, Dowlais is one of the global leaders in innovative automotive solutions with approximately GBP 6 billion in revenues. As you will hear in a moment, Dowlais is a perfect fit for AAM.
Starting on Slide seven, the combination of AAM and Dowlais will create a new company with significant global size and scale, which will incrementally transform AAM into a premier global driveline and metal forming supplier ranked in the top 10 in North America and top 25 globally. Slide eight depicts an early indication of how we intend to operate the product groups within our driveline and metal forming structure. Where appropriate, we will reallocate business and supporting resources within the defined product groups. Our goal is to minimize the change to both businesses while delivering our respective business plans and optimizing the synergy opportunities when allowed. Clearly, the Dowlais automotive and powder metallurgy businesses are complementary to AAM's existing driveline and metal forming structure. The combined group will have a comprehensive, highly engineered driveline portfolio and an expansive and vertically integrated metal forming capability.
On slide nine, the acquisition further solidifies AAM's capabilities to support OEMs across multiple light vehicle segments, including ICE, hybrid, and electric propulsion systems. This combination also allows for content per vehicle upside potential stemming from a larger product family and deep customer relations. Post-close, we believe AAM will be even better situated for sustained long-term profitable growth from our ability to better support our OEM customers across various propulsion systems driven by our expanded product portfolio. In addition, we will have bigger opportunities in the China market with both domestic and international OEMs by leveraging the solid relationships built up over time by both AAM and Dowlais. Finally, as a combined company with deep expertise in driveline and metal forming technologies, we can expand to other platforms for additional growth. From a diversification standpoint, the combined business benefits greatly from a more balanced customer mix and geographic presence.
We anticipate our GM concentration to reduce to 25% or approximately 25% post-close from approximately 40% today. Additionally, our global customer base grows and expands, as you can see on the pie chart. As to our geographic presence, our North American dependence reduces to 54% from 73% today, while our European and Asian exposures grow. In summary, this acquisition better positions AAM internationally and provides a more balanced and diversified customer mix and geographic presence. Let's discuss how we're going to create shareholder value. On slide 13, we summarize the joint synergy plan that was developed with Dowlais to generate approximately $300 million of annual run rate cost synergies. This work was done over many weeks with advisors and accountants in order to provide both companies comfort and confidence in achievability. The synergy savings will come mainly in three buckets.
SG&A, approximately 30%, whereby we'll be looking to eliminate duplicate public company costs and other costs, optimization of the combined workforces, streamlining of engineering, research, and development expenses, and the elimination of duplicate business and technical offices. On the purchasing front, which will be approximately 50% of the synergies, we'll leverage the enhanced economies of scale and spend to reduce supply costs. We'll utilize vertical integration capabilities to deliver insourcing initiatives. We'll be achieving global freight and logistical savings to increase scale, utilization, and benefits from third-party logistics suppliers. The final bucket, operations, which will be 20% of the synergies, increasing operating efficiencies in the plants through the implementation of best of the best operating systems, and then ultimately optimizing the combined global manufacturing footprint.
We anticipate run rate savings to be substantially achieved by the end of the third year, and the costs required to achieve our synergy plans are approximately equal to one year of savings. Transitioning to financing, balance sheet, and capital allocation, we have fully committed financing in place for this transaction. We expect to raise approximately $2.2 billion of new debt financing. At closing, this deal is anticipated to be approximately net leverage neutral before synergies, and we expect to have ample liquidity. Regarding capital allocation, historically, AAM has been focused on organic growth and debt paydown. That will remain true in the near term. However, as a combined organization with greater size and scale, we can now target a more balanced capital allocation policy once we are below 2.5 times net leverage, including a strong consideration of returning capital to shareholders.
Before I close, I want to share some more good news regarding our 2024 estimated financial results as compared to targets that were previously shared with you. We now expect AAM sales this year in 2024 between $6.1 billion-$6.15 billion, which is no change from our November guidance. From an adjusted EBITDA range standpoint, we expect $740 million-$750 million compared to $715 million-$745 million previously communicated, an Adjusted Free Cash Flow range of $220 million-$230 million versus $200 million-$220 million as previously communicated. Clearly, AAM expects to achieve the high end of our adjusted EBITDA and Adjusted Free Cash Flow guidance, delivering strong 2024 performance. We will provide a full update of our fourth quarter and full year performance when we announce our earnings on Friday, February the 14th. In conclusion, we are extremely excited about this strategic combination.
It will create an organization with meaningful size, scale, and synergy opportunities, a more robust business model based on compelling strategic rationale and industrial logic, a powertrain agnostic product portfolio while realizing enhanced diversification, a strong experienced and blended management team with a proven track record for success, significant margin and earnings accretion while accelerating opportunities for growth, and finally, strong value creation for all stakeholders, including an enhanced capital allocation policy in the future. In previous investor calls, I've outlined that AAM's efforts have been to generate strong free cash flow, strengthen our balance sheet, advance our electrification portfolio, and position us for profitable growth. This strategic combination with Dowlais does just that, and we are thrilled with this transaction, and we hope you are too. Thank you for your participation today.
I'll now hand the call back to David Lim to start on the Q&A portion of this call. Thank you.
Thank you, David. We have reserved some time to take some questions, and I would ask that you please limit your questions to no more than two. So at this time, please feel free to proceed with any questions you may have.
Thank you. We will now begin the question and answer session. At this time, I would like to remind everyone, please press star and then the number one on your telephone keypad. We'll pause for just a moment to assemble our roster. And today's first question comes from James Picariello with BNP Paribas. Please go ahead.
Hi. Good morning, everyone. Good morning, James. My first question is on net leverage. So day one, including the full run rate, is about two and a half times.
But at the close, assuming a clean year-end close, what would that net leverage look like on a true day one? And the one comment in the slide on the $300 million in cost savings, is it one year of actual cash cost to achieve the $300 million? So thinking about $100 million in cash cost to achieve the $300 million, thanks.
Hey, good morning, James. This is Chris. I'll take both of those questions. Let's start first with net leverage, and your question is at close, a true day one. And you may have noted in some of David's prepared remarks, we anticipate to be approximately leverage neutral on day one. So what does that mean? If you look at the 2024 information that we provided here today, as well as our 9/30 leverage, as a company, we're right around 2.80-ish.
And I would expect day one to look very similar to that. So that's what we mean when we say roughly leverage neutral at true day one close. Second question, you referred to cash cost to implement our synergy achievement. So we have full run rate savings, ultimately building to $300 million of annual flow-through from a synergy perspective. In terms of cost to achieve, it would be one time those costs. So think $300 million. So from a timing perspective, those, of course, would be incurred over the next few years, a little bit front-loaded as we're investing into the initiative to realize those savings. So think about maybe two-thirds of it sort of in the first year or two, and then they'll start to tail off pretty quickly.
Okay. Got it.
And then just the timeline from here on shareholder approval and just any color commentary on what led to this, what led to this announcement, as it's been a long time coming. I know that there was some discussion when Dowlais was still GKN Automotive and owned by Melrose that Axle was looking at the asset at that point, which I think you guys might have refuted at the time. So yeah, just curious on that timeline in terms of the relationship here.
Thanks. Yeah, James, this is David Dauch. With respect to the timeline, clearly we've had tremendous respect for GKN Automotive throughout our history as a company. Obviously, we looked at the business initially back in the 2018 calendar year period of time when GKN Automotive was up for sale. Melrose ultimately purchased the business at that time.
To your point, we did have discussions with Melrose in the 2022 calendar year period of time. Unfortunately, we couldn't come to an agreement at that time. However, we're very proud and very excited about the opportunity that we had before us that we just announced today. GKN Automotive is an outstanding company with outstanding talent, with an expansive product portfolio that's very complementary to our business. We're over the moon excited in regards to the opportunities that exist here. There's tremendous synergistic opportunity and shareholder value creation opportunities. So like I said, thrilled and excited that we're to this point. It's been a long time coming, but it's two great companies coming together, and it's the perfect fit. With respect to timeline going forward, I mean, clearly we'll have to get shareholder approval on both sides.
At the same time, we'll go through regulatory approvals across multiple countries, and there'll be other customer closing requirements that we'll have to navigate our way through. But hopefully, that addresses your question.
Thank you. And our next question today comes from Tom Narayan with RBC. Please go ahead.
All right. Thanks for taking the questions. Just to follow up on the last question on the synergies, thanks for all the detail here. It looks like it's been already pretty vetted out in terms of the synergies. Just curious if this is really the kind of final level you think you could achieve, or is there more potentially it could happen? Just how kind of usually when you get a deal announcement like this or proposal, it's kind of a very high-level thematic kind of synergy level, but it seems like a lot of detail here.
So, just curious if you kick the tires and all that kind of stuff and how kind of detailed the work you've already done on getting to this $300 million number.
Yeah, Tom, great question. We have been working extensively with the Dowlais Group, as well as, as I mentioned, accountants and other folks because we're required by the U.K. Takeover Panel to do such a thing. It's actually a great practice. We've been working for an extensive period of time, especially the last several weeks, in regards to our team sitting side by side, going through all the different synergistic buckets. We broke it down for you in the form of SG&A, purchasing, and operations. We have justification, support, and substantiation that's been reviewed with all the accountants that signed off on this. So we're very excited of the fact.
And like you said, we're well advanced in regards to identifying the plan to achieve these. We're highly confident that we can achieve these, and we have a large market basket to make sure that we're capable of achieving these going forward. Clearly, we'll have further opportunity as we have a chance to visit their facilities. We were limited on what we could or could not do in that respect. So as we get there, we'll be able to identify, hopefully, more operating improvement opportunities, as well as looking at the right combination of facilities that we should maintain going forward. But we're extremely excited about the synergistic opportunity. That truly is the value creation part or a big part of the value creation part, and we can't wait to get after it.
Great. Thanks. And my follow-up, I totally understand you're getting more OEM diversification.
The question, though, has to do with the geographic diversification, getting more exposure to Europe. Just curious why you think that's a good idea given everything happening in Europe with Chinese competition, CO2 rules, electrification there, maybe going on a different path than maybe the U.S. is. Is this really something you want to do to be more exposed to what's happening in Europe, or are you just looking at, "Look, diversification is good," however you look at it, that's what's happening? Or is it more that you're excited about expanding more into Europe? Thanks.
Well, we're excited about all the diversification, the customer side, the geographic presence side, as well as the product side of things as well. On the product side, we're expanding our portfolio. We'll be able to offer more to our customers, which is fantastic for not only us, but also for our customer base there.
And we're both reputable suppliers to the OEMs so that we bring stability in providing product to those customers. On the customer side of things, it's always better to reduce your concentration. When we started AAM back in 1994, we had two customers, and GM represented 98.5% of our business, and Ford was 1.5%. When we did the Metaldyne acquisition, we dropped our GM percentage from roughly 67% down to approximately 40% where we sit today. And with this acquisition, once it closes, we'll drop GM to approximately 25%. So that's just good business practice across the board. At the same time, the other customers will be somewhere around the 15% or less, so a good position to be with each of the individual customers.
On the geographic presence side, I always think it's better, especially if you want to truly be an international and global company, to have balance and presence in each of those regions. We recognize that each region brings different opportunities and different challenges. North America is a very strong market for us. China is the largest market in the world, and we want to be on the cutting edge of some of the electrification activity that's taking place there, and we recognize some of the challenges that exist in Europe, but we turn it the other way and say we think there's opportunity in Europe. Dowlais is very well positioned with a powertrain agnostic portfolio that it can adjust to ICE, hybrid, and EV applications. We have complementary products to add to that. At the same time, we want to be the supplier of choice to the OEMs going forward.
There's no doubt there's going to be rationalization taking place. It already is taking place globally, but especially in Europe. We think that we can capitalize on that going forward. So we're not concerned. I mean, obviously, we'll keep a watchful eye on the restructuring that's taking place in Europe, and we'll make the necessary adjustments to our business, but we're going to turn a negative or a challenge that's out there into a positive.
Great. Thank you.
Yep. Thank you.
Thanks, Tom.
Thank you. Our next question today comes from William Tackett with Morgan Stanley. Please go ahead.
Hey, guys. Good morning. Just stepping in for Adam this morning. Just two quick questions. I guess first, obviously, a lot of overlap between the two businesses.
When you think about product market share and concentrations, do you think there's any risk of any one being sensitive or too high?
This is David. No, but I mean, clearly, we've done our preliminary assessment, all the antitrust type activities. We've got to let our legal teams and our collective organizations, our subject matter experts work through that. But we're highly confident in regards to our position there. We do not participate in the side shaft business today. They do not participate in the beam axle business today. So those, I don't expect any issues there. Clearly, we both have business in all-wheel drive and electrification, so we'll have to assess that a little bit closer. And then we have a stronger, what do I say, steel forging and machining business, and they have a stronger powdered metal business, but both very complementary to one another.
So we're not anticipating any problems, but we got to let the process work in due course.
Got it. That's very helpful. And then just last one, would you characterize the sale of Dowlais? Would you call it competitive? And I guess if so, I mean, does that make a difference for you guys? When you say competitive, what do you mean by that? Just so I'm clear. Like were there other bidders in the sale?
Quite honestly, I would just focus on the relationship that we had with Dowlais and with their board. And as I spoke earlier, we've had a long-standing relationship with them and obviously built up a very strong relationship with Simon Mackenzie Smith and Liam Butterworth, and I have known each other for a long time. So we've always felt that this was a good combination.
We're better together than we are independently of each other, although we both were successful on an independent basis. We just think with where the market is today, potential challenges that are out there in the future, that size and scale certainly mean something. The portfolio we're coming to the market with means something, and the complementary engineering and technology base that we both work from, as well as our operational excellence, is going to make a big difference for this business going forward and provide OEMs tremendous opportunities to work with a reliable and stable and a proven supplier. Yeah. The value creation story you can see on our slide five is tremendous. So put that all together. It's a good outcome.
Perfect. Congrats, guys. It's a big day.
Thank you.
And our next question today comes from Joe Spak with UBS. Please go ahead.
Thanks. Good morning, everyone.
Just a quick looking at Dowlais financials, looks like they were also sort of around 5% sales CapEx. I think that's in line with your long-term average. I'm just wondering if that's still the go-forward reasonable range and, I guess, related. On the synergy side, I think there was something about optimization of operations. What do you think about the combined footprint? Is there some consolidation likely, or how are you thinking about the combined footprint?
Yeah. Joe, this is Chris. I'll take your CapEx question and then toss it over to you. We can talk a little bit about the footprint. From a CapEx perspective, both companies have been sort of running in that 4%-5% range. We've been traveling closer to the 4% range currently, meaning American Axle. I would expect, generally speaking, that range to continue into the near future.
That's, of course, in addition to any of the synergy restructuring costs that we talked about. But generally speaking, I would expect a decent opportunity there from a CapEx. But also, through our process, as we combine, we have not disclosed or talked about any CapEx synergies. As we work through this, there could be some of those that emerge through the combination as when we start to integrate the two companies together. So potentially some ways to mitigate that as well.
Yeah. And then, Joe, this is David. On the operational consolidation side of things, clearly, we'll look at business and technical offices first. We'll look at the manufacturing facilities thereafter. Right now, we have not had the opportunity to visit their facilities, but clearly, we will going forward. There's no doubt there will be synergistic opportunities there.
We'll have to time those out appropriately, but we've got to assess all the capacity utilization. We got to assess the square footage, the proximity to some of the different locations that we have. But yes, there will be synergistic opportunities associated with both office and technical footprint consolidation and manufacturing plant consolidation.
So just to quickly follow up, the optimizing manufacturing footprint bullet, that doesn't necessarily include plant consolidation. That's just sort of, again, optimization of the combined footprint, and that consolidation could be down the road, but incremental to what you laid out here today.
Yeah. This includes a portion of that. But as I mentioned, we are limited in regards to not being able to visit the facilities.
Therefore, we don't know if we've captured the full magnitude of it, but we certainly have included a portion of it in the numbers that we've identified at the $300 million run rate synergies. But we do have a strong market basket, and we're hopeful that we can grow that market basket going forward.
Okay. Thanks. And then just quick, I know you mentioned $2 billion in liquidity. Just, I guess, what type of just cash balance do you think the new entity needs to hold, or what's sort of like a minimum level?
Yeah. Joe, this is Chris. I would think somewhere between the $600 million-$750 million range from a cash balance perspective that we would look to hold over time. Today, AAM alone is a little over $500 million that we hold, but combined, we can optimize some of that. Okay.
Thanks so much. Congrats.
Yeah. Thanks, Joe.
Thank you. And our next question comes from Dan Levy with Barclays. Please go ahead.
Hi. Good morning. Thanks for taking the question. I wanted to first start with the question on powertrain. And obviously, we're seeing one of your competitors taking some pretty significant action on the cost-based part as they sort of reposition to a different powertrain world. So I mean, we've heard your view in the past on where you stand on powertrain. Wondering, as far as Dauch goes, how much work there might be to essentially adjust to the different powertrain reality that we have, especially in North America?
This is David. Listen, our job is to put together a powertrain agnostic portfolio that can support the market requirements, whatever they may be, at whatever time it may take place. It's going to vary by region.
Clearly, China and Asia are leading with respect to electrification. Dauch has a leading joint venture over there that supports a lot of that business today with both domestic as well as international OEMs. We also have business in China ourselves today that's benefiting from that. So combined together, I think we'll do quite well. From a portfolio standpoint, they have a very expansive portfolio when it comes to electric drive units. So does American Axle. So that's complementary from an electric drive unit standpoint. So we should have the majority of the market covered with the product there. On the e-Beam side of things, that's really led by American Axle. They are not in the beam axle business, but we've done a lot of work in that respect. And it's just a matter of when the market really needs an electric beam axle in the marketplace.
All we've tried to do is make sure that we've got bookshelf technology that can support the market demand that's driven by the consumer is really what it comes down to, and clearly, there's been an adjustment here in North America based on what the consumer really wants. There's been an adjustment, or will continue to be an adjustment based on the Trump administration being in office and potentially slowing down some of the requirements going forward, but regardless, we need to be in a position regardless of who the administration is or what the policies are to be able to provide products that meet the consumer's needs and our customer direct needs. And that's the intent of what we're doing, so a lot of work's been done by them already, meaning Dauch on development. A lot of work's been done by us on development.
We'll scale back ER&D where appropriate, but at the same time, we'll continue to invest in electrification to make sure that we have a powertrain agnostic portfolio going forward.
Is that part of the synergy as far as the powertrain sort of consolidation side?
Yeah. There's certainly some synergistic opportunity from an ER&D standpoint. We need to spend a little bit more time looking at things there. But yes, to your question, the answer is yes.
Okay. Thank you. My follow-up question is maybe one more of historical context. The last significant acquisition or transaction that you did was Metaldyne back in 2018. And I think we could say probably the results at least were mixed. Maybe you could just talk to some of the lessons learned from when you did Metaldyne and how that will shape the execution around this. Thank you.
We actually think that we did an outstanding job integrating the Metaldyne acquisition. We not only met, but exceeded our synergistic delivery and deliverable, I should say. We're very pleased with what we did there. We used a lot of that history that we learned from Metaldyne, good things as well as lessons learned as we looked at and evaluated Dowlais. We also needed for the various constituents, like the accountants and all, we had to identify the process that we used, the discipline of that process, the integrity of that process, the market baskets to support the $300 million that we communicated to everybody. We're hopeful that we can continue as we work closer with the Dowlais team to continue to grow that going forward. We see a tremendous opportunity here.
Again, as I said in my opening comments, we want to be very smart about what change we introduce and how we introduce that. Both are successful businesses that have to deliver their existing business plans, but clearly, there are synergistic opportunities here that can enhance the margins, generate strong cash flow going forward, and be accretive to the overall business.
Yeah, and Dan, this is Chris. I would also add to that, not only getting to the point today of announcement of the synergies, but also going forward on the implementation of that, leveraging the best of both teams was a key lesson learned through the MPG acquisition and implementing a very structured process that we did then. We saw the benefits of that to enhance speed and increase opportunity sets for us to achieve those synergies.
So there were lessons learned, as David said, on both sides, but clearly, we have a great roadmap to deliver this result and continue to press for speed and more through the process.
Great. Thank you.
Thank you.
Thank you. And gentlemen, your final question today is from Doug Carson with Bank of America. Please go ahead.
Great, guys. Thanks so much and congratulations on this historic move here. I wish you the best for it. The diversity and the scale is typically positive for bondholders. So I think bond investors are looking to optimistically kind of bigger is better in many regards for this industry. If you could talk maybe a little bit about the debt financing. I think you mentioned about $2.2 billion of new debt. Have you thought about the structure around that new debt?
If it would be secured or unsecured or bank loans or bonds, just getting some questions from interested bondholders.
Yeah. Doug, good morning. This is Chris. I'll take that question. Yeah. As we indicated, we would expect to raise about $2.2 billion of incremental debt to conduct this transaction. Look, we'll take as we go through this, looking at a combination of some bank loans, some institutional loans, and then some notes, either secured or if the markets are opportunistic for an unsecured structure. But I would expect holistically in terms of a, I'll call it, ratio of secured to our total debt to increase somewhat through this transaction as part of our financing package that we go out to the market with.
Great. And I came on the call a minute or two late. Did you give some timing?
I think it's going to close by the end of calendar 2025. Is that right?
Yes. That's our current target. Correct.
Okay. All right. Wonderful. Thanks for letting me get in the queue. I appreciate it.
Yep. Thank you, Doug.
Well, thank you, Doug. And we thank all of you who have participated on this call and appreciate your interest in AAM. We certainly look forward to talking with you in the future. Thank you.
Thank you. Ladies and gentlemen, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.