UPDATE 1-Kennametal to buy Allegheny Tech's tungsten business for $605 mln
* Kennametal says deal to strengthen tooling business
* Says transaction to be neutral to full-year earnings
* Allegheny Tech stock up about 5 pct premarket
Sept 16 (Reuters) - Industrial toolmaker Kennametal Inc said it would buy Allegheny Technologies Inc's tungsten materials business for $605 million to strengthen its materials and cutting tools business and expand in the aerospace and energy markets.
Allegheny's tungsten material business, ATI Tungsten Materials, makes tungsten powder, tungsten heavy alloys, tungsten carbide materials and carbide cutting tools.
Kennametal said the acquisition would strengthen its tooling business in the areas of metal cutting and metal finishing technologies, adding brands such as Stellram Products and Garryson Products.
Separately, Allegheny said the sale would help it focus on its high-performance metals and flat-rolled products businesses.
Kennametal shares were up 1 percent in premarket trading while Allegheny stocks gained about 5 percent.
Kennametal also said the tungsten materials business, which recovers material from scrap, would boost material sourcing and accelerate plans to develop an advanced tungsten carbide recycling facility in the United States.
The company said it expects the acquisition to reduce planned capital expenditure by about $30 million-$35 million.
Kennametal said it plans to fund the acquisition through a combination of cash and credit. The deal is expected to be neutral to earnings for fiscal 2014 ending June.
J.P. Morgan Securities LLC was the financial adviser to Kennametal. Goldman, Sachs & Co was the sole financial adviser to Allegheny and K&L Gates LLP is the company's legal counsel for the deal.
Kennametal shares were trading at $46.51 before the bell, after closing at $46 on the New York Stock Exchange on Friday.
Allegheny's stock rose to $29.94 from $28.63 at close Friday.