TransDigm Group Incorporated (TDG) has agreed to buy Airborne Systems Inc from Metalmark Capital. The all-cash deal is valued at approximately $250 million and is expected to close by the first quarter of 2014, subject to regulatory approvals.
The acquisition is a strategic move by TransDigm as the nature of operation, commercial and military clients and products of Airborne Systems perfectly complement TransDigm’s existing portfolio. Through this acquisition, TransDigm will be able to leverage Airborone’s proprietary personnel parachutes, cargo aerial delivery systems, emergency escape systems, naval decoys and other related products, thereby enhancing the growth prospects for TransDigm.
Airborne Systems is owned by Metalmark Capital, a leading private equity firm investing in targeted sectors. Headquartered in New Jersey, Airborne Systems is the leading designer and manufacturer of personnel parachutes, cargo aerial delivery systems, emergency escape systems, naval decoys and other related products.
Apart from the U.S. government, 50 other countries including the U.K. rely on the company's highly proprietary products. Airborne’s products include current generation troop parachutes, latest generation steerable parachutes for tight drop zone landings, and the ram-air, maneuverable parachute systems used for special operations. The company's precision-guided cargo parachutes are used for high altitude GPS-driven cargo drops.
In 2013, Airborne generated revenues of about $160 million. The domestic customers account for about 45% of its revenues while the international customers contributed approximately 55%. Therefore, the large international customer base is expected to provide a buffer for TransDigm, given the uncertainties of the U.S. defense spending environment.
TransDigm will further strengthen its presence in the military or defense market, which is one of the primary revenue streams for TransDigm.
Based in Cleveland, OH, TransDigm Group recently has been pursuing strategic acquisitions to strengthen its presence in the aerospace industry. All the acquisitions the company has been making are accretive to earnings and revenues. In the last reported quarter (4Q13), both earnings of $1.75 and revenues of $539.7 million surpassed the Zacks Consensus Estimate of loss of 18 cents and $538 million, respectively. This apart, both improved year on year primarily driven by the positive synergies from the acquisitions.
TransDigm currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the aerospace sector include Alliant Techsystems Inc. (ATK), Elbit Systems Ltd. (ESLT) and Hexcel Corp. (HXL). While Alliant Techsystems and Elbit Systems carry a Zacks Rank #1 (Strong Buy), Hexcel holds a Zacks Rank #2 (Buy).
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