Aerospace Company TransDigm to Buy Jet-Components Maker Esterline--Update
October 10 2018 - 11:38AM
Dow Jones News
By Doug Cameron
TransDigm Group Inc. agreed to buy rival Esterline Technologies
Corp. for $4 billion, a deal that would put the aerospace-parts
maker in a class of giant suppliers to the jetliner industry.
TransDigm's largest-ever deal would add to its product line the
cockpit components, sensors and specialized parts Esterline makes
for Boeing Co. and Airbus SE commercial and military aircraft.
Shares in Esterline rose 30% to $115.08 on Wednesday, while
TransDigm's shares fell 4% to $336.81.
Analysts have viewed Bellevue, Wash.-based Esterline as an
acquisition target for months because some of its customers are
looking to make more parts themselves to cut costs and improve
productivity. The Wall Street Journal reported in July that the
company was looking for possible buyers.
TransDigm has sought to insulate itself from the changing demand
of plane makers by buying companies that are the sole suppliers for
certain parts. The proposed deal would add about $2 billion to the
$3.7 billion in sales TransDigm has forecast for fiscal 2018.
The focus on proprietary parts bolsters TransDigm's position in
aerospace supply chains alongside United Technologies, and the
aviation arms of General Electric Co. Honeywell International Inc.
and Precision CastParts, a unit of Berkshire Hathaway Inc.
The deal is the latest in a string of mergers that have reshaped
the aerospace industry.
Last year conglomerate United Technologies signed a deal to buy
airplane-parts maker Rockwell Collins Inc. for $23 billion, in what
would be the biggest aerospace deal in history, creating a supplier
with about $50 billion in annual sales. That deal is expected to
close soon.
Boeing closed a deal this week to pay about $3.2 billion for
parts specialist KLX Inc. Boeing executives say they remain on the
lookout for deals to expand the company's services arm.
And earlier this year, Northrop Grumman Corp. bought fellow
defense contractor Orbital ATK Inc. for nearly $8 billion.
Esterline sold its Kirkhill seals business to TransDigm earlier
this year for $50 million and in January appointed a new chief
financial officer, Stephen Nolan, with a long record overseeing
mergers and acquisitions. Mr. Nolan was previously finance chief at
Vista Outdoor Inc., the outdoor sports specialist spun out of the
merger between Alliant Techsystems Inc. and Orbital Sciences
Corp.
Esterline's history dates back to the Weston Electrical
Instrument Company founded in 1888. In 2012, activist hedge fund
Relational Investors disclosed a 6.6% stake in Esterline and
unsuccessfully pushed for a sale of the company. More recently,
First Pacific Advisors disclosed a large stake in the company that
resulted in Esterline appointing a new board member.
Cleveland-based TransDigm said it is offering $122.50 a share in
cash for Esterline's outstanding stock, a 38% premium to Tuesday's
closing price of $88.79. That is richer than analysts expected.
The transaction has been approved by the boards of both
companies and is expected to be completed during the second half of
next year, TransDigm said.
--Micah Maidenberg contributed to this article.
Write to Doug Cameron at doug.cameron@wsj.com
(END) Dow Jones Newswires
October 10, 2018 11:23 ET (15:23 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Esterline (NYSE:ESL)
Historical Stock Chart
From May 2024 to Jun 2024
Esterline (NYSE:ESL)
Historical Stock Chart
From Jun 2023 to Jun 2024