Market Overview

Aerospace Supplier TransDigm Buys Esterline Technologies In $4B Deal

Aerospace Supplier TransDigm Buys Esterline Technologies In $4B Deal

Aircraft component designer, producer and supplier TransDigm Group Incorporated (NYSE: TDG) confirmed Wednesday it entered an agreement to buy aerospace and defense supplier Esterline Technologies Corporation (NYSE: ESL) for a near 40-percent premium.

What Happened

TransDigm reached an agreement to acquire Esterline for $122.50 per share in cash in a deal which values the company at around $4 billion, the companies said in a press release. The purchase price represents a premium of 38 percent to Esterline's closing price Tuesday. TransDigm expects to finance the purchase through existing cash on hand along with the issuance of new term loans.

Shares of Esterline were trading higher Wednesday morning by 30 percent at $115.21, which implies a discount to the takeout offer.

Why It's Important

The acquisition of Esterline gives TransDigm significant exposure to the aftermarket segment of the aerospace industry, especially regional and business jet aircraft and major defense platforms.

"Esterline's core aerospace and defense business consists of primarily proprietary, sole source products with significant and growing aftermarket exposure," TransDigm Executive Chairman W. Nicholas Howley said in the press release. "We view this as highly complementary to our existing business." 

What's Next

The deal is expected to be "modestly accretive" to TransDigm's earnings per share and is expected to close in the second half of 2019. TransDigm said the newly created entity will maintain sufficient financial flexibility to pursue any anticipated operating, acquisition or other opportunities that may arise. 

Related Links:

Time To Step To The Sidelines On TransDigm?

Barclays: TransDigm A 'Victim Of Its Own Success,' Moves To Top Pick In Aerospace & Defense

Posted-In: aerospace defenseM&A News Best of Benzinga


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