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Textron (TXT) to Acquire Beechcraft for $1.4 Billion

NEW YORK (TheStreet) -- Textron (TXT) rose 1.6% to $36.76 on Friday on news it will acquire Beech Holdings, the parent company of Beechcraft, for $1.4 billion.

Textron produces Cessna aircraft, which compete with aircraft produced by Beechcraft.

The deal would see Textron take on $1.1 billion in new debt to buy the competitor aircraft maker. JPMorgan Chase will provide the financing required for the deal to go through.

Beechcraft's board of directors unanimously approved the transaction, and it is expected to close sometime in the first half of 2014, pending regulatory apporvals. If the deal does not go through Beech Holding will pay a $48 million termination fee to Textron.

TheStreet Ratings team rates TEXTRON INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate TEXTRON INC (TXT) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, TXT's share price has jumped by 32.29%, exceeding the performance of the broader market during that same time frame. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • The debt-to-equity ratio is somewhat low, currently at 0.92, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • TXT, with its decline in revenue, underperformed when compared the industry average of 9.6%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Aerospace & Defense industry and the overall market, TEXTRON INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • You can view the full analysis from the report here: TXT Ratings Report

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