TransDigm Acquires Esterline

Aerospace, motors and generators companies to combine in $4B sale

In a major business brief, aerospace and defense company TransDigm Group Incorporated (Cleveland, Oh.) and Esterline Technologies Corporation of Bellevue, Wash., announced today that they have entered into a definitive agreement under which TransDigm will purchase all of the outstanding shares of common stock of Esterline.

This has major financial implications for both companies and the industry. First, TransDigm’s purchase is weighted at $122.50 per share in cash—a premium of 38% to Esterline’s closing price on October 9—or a total transaction value of approximately $4.0 billion including the assumption of debt. The transaction has been approved by the Boards of Directors of both companies, a joint press release October 10 said.

TransDigm is best known for manufacturing components such as mechanical actuators and ignition systems. It acquires a company specifically tailored towards the aerospace and defense components industries. The acquisition of Esterline specifically gives TransDigm better aftermarket exposure, the latter said, noting Esterline is “an industry leader in specialized manufacturing for these sectors” with anticipated fiscal year 2018 revenue of approximately $2.0 billion. Esterline consists of 28 business units organized across eight platforms to deliver specialty aerospace, defense and industrial products, and employs over 12,500 employees in more than 50 operating locations throughout the world.

TransDigm executives went on to say “Esterline has attractive platform positions in both the OEM and aftermarket and has substantial content on many important commercial aircraft variants, many regional and business jet aircraft and major defense platforms.”

“We are pleased to have reached agreement to acquire a collection of businesses that fit well with our focused and consistent strategy,” stated W. Nicholas Howley, TransDigm’s Executive Chairman. “Esterline’s core aerospace and defense business consists of primarily proprietary, sole source products with significant and growing aftermarket exposure. We view this as highly complementary to our existing business. We are confident that the combination of Esterline’s leading positions and our proven track record of driving performance will enable us to deliver the private equity-like returns our investors have come to expect from this investment.”

Meanwhile, Kevin Stein, TransDigm’s President and CEO, cleared up the structural end: “Upon completion of the transaction, Bob Henderson, TransDigm’s current Vice-Chairman, will oversee the integration and operations of Esterline. Mr. Henderson has been a key member of TransDigm’s management team for close to 25 years and has overseen the integration of numerous acquisitions during this period, including our recent acquisition of Kirkhill from Esterline.”

The acquisition will be financed through a combination of existing cash on hand of approximately $2 billion and the incurrence of new term loans. TransDigm has obtained commitments for the full amount of financing required for the transaction.  Immediately upon closing, the combined company will maintain the financial flexibility to meet any anticipated operating, acquisition, and other opportunities that may arise though a combination of cash on hand, undrawn revolver, and under certain circumstances, additional availability under its credit agreement.

The transaction is subject to customary closing conditions, including Esterline stockholder approval and the receipt of required regulatory approvals. The companies expect to complete the transaction in the second half of calendar 2019.

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