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Precision Castparts Pays $625M for Aerospace Dynamics

Stocks in this article: PCPBA

NEW YORK (The Deal) -- Precision Castparts  (PCP) on Thursday said it would spend 
$625 million to acquire Aerospace Dynamics International from Marvin Group, part of a broader scramble by aerospace component manufacturers to increase scale and bring down costs.

Valencia, Calif.-based ADI is a manufacturer of titanium parts for Boeing  (BA) and Airbus aircraft, among others. Precision Castparts is already a major supplier to commercial aircraft, and company chairman and CEO Mark Donegan said that Aerospace Dynamics "is an acquisition we have pursued for several years."

Aircraft manufacturers have been pushing suppliers, including Precision Castparts, to bring down component costs. Donegan said that Precision Castparts post-deal will "aggressively work" to source fasteners, forgings and castings that ADI currently must purchase from third-party vendors, potentially bringing down overall costs, while adding Aerospace Dynamics' expertise in hard metal machining, assemblies and large complex components.

"They have invested in world-class facilities and developed large part capabilities that will expand our aerostructures product offering and role on next-generation aircraft," Donegan said.

The deal also helps Portland, Ore.-based Precision Castparts to continue to expand its presence as a supplier to Airbus, diversifying itself among a number of manufacturers at a time when those companies are seeking to cut supplier costs.

Canaccord Genuity analyst Ken Herbert in a note earlier this month said that Boeing has been vocal in expressing a belief that some suppliers make a disproportionately high margin relative to their risk. While Boeing did not name names, Herbert said "We believe this comment was specifically referring to Precision Castparts."

Marvin Group is a privately held holding company of a number of aerospace and defense firms, including Marvin Engineering Co. Inc., Marvin Land Systems Inc. and Flyer Defense LLC. The company traces its origins to Marvin Gussman, who opened a machine shop in Inglewood, Calif., in the 1960s.

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