Is B/E Aerospace Worth $140 Per Share In A Sale? One Analyst Thinks So

The Wall Street Journal reported over the weekend that B/E Aerospace BEAV is considering a possible sale of the company (or splitting itself up, or divesting its business) as part of a strategic review.

What's known is that the aircraft interior maker has hired bankers from Citigroup as financial advisers. What's not known is who will be interested in acquiring the Wellington, Florida-based company with a market cap of nearly $10 billion as of Tuesday morning.

More importantly, a price tag of such a deal isn't known.

Kevin Ciabattoni of Keybanc Capital Markets believes the price tag for the entire company could ring in as much as $140 per share, representing a near 40 percent upside. Not only is Ciabattoni estimating a $140 buyout price, the analyst believes that a serious offer is already on the table.

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“Given the company's recent push into the oil and gas markets along with a recently closed aerospace deal and two pending deals, we have to believe that B/E Aerospace management received a legitimate and compelling offer that it had to seriously consider and bring to its board,” Ciabattoni wrote in a note to clients on Tuesday.

Ciabattoni believes that investors need to be properly compensated for the company's “robust backlong, growing SFE revenues, future lavatory retrofits and a ramping retrofit cycle.”

As such, Ciabattoni values the company on its 2016 revenue, EBITDA and earnings power which yields a company-wide sum-of-the parts take-out value of $125 to $140 per share.

Investors, however, shouldn't get too excited. Not yet, at least.

Ciabattoni believes that there is also a possibility the company will only sell its consumables management segment, which is a global leader in the distribution of aerospace grade fasteners and related content.

The segment is on track to generate around $1.6 billion of revenue in 2014, generating an operating income of around $300 million and an EBITDA of $330 million.

Names like Boeing or Honeywell may be interested in the division that recently expanded into the oil and gas markets. According to Ciabattoni, the division “now appears to have critical mass to begin to take share in a highly fragmented energy related market place.”

Traders looking at B/E Aerospace as a short-term play should consider Ciabattoni's potential bearish scenario.

If B/E Aerospace announces that an offer is on the table for its consumables management segment, shares will sell off. Ciabattoni notes that selling only the single unit will “not necessarily unlock further shareholder value,” even with a $4 billion to $5 billion offer.

The consumables management segment is expected to contribute roughly $2.50 in earnings per share in 2015, and management will need to fill that gap with a major share buyback, debt reduction plan or some combination of the two to make the deal attractive.

Bottom line, the sale of the consumables management segment will leave the remaining business at a valuation similar to where the stock was trading prior to the company considering strategic alternatives.

“We do not see enough shareholder value being created in any of our scenarios to proceed with just a sale of the consumable segment,” Ciabattoni wrote.

Shares are currently Buy rated with a price target of $108.