TransDigm Buys Breeze-Eastern as Aerospace Consolidation Continues
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Correction: Corrects closing price in the second paragraph.
Aerospace component manufacturer TransDigm Group (TDG) - Get Report said Thursday it plans to acquire rival Breeze-Eastern (BZC) in a deal valued at $206 million in cash.
Terms of the deal call for Cleveland-based TransDigm to pay $19.61 per share for Breeze-Eastern, a slight discount to the target's $21 Wednesday close. The deal, which was unanimously approved by Breeze-Eastern's board, allows the Breeze-Eastern and its advisers to shop for superior proposals for 40 days.
Whippany, N.J.-based Breeze-Eastern is a manufacturer of lifting and pulling devices used on military and civilian aircraft, including rescue hoists, cargo hooks and weapons-lifting systems. The company employs about 170 at facilities in New Jersey and Virginia, and generates about 75% of its total revenue from military sales.
Breeze-Eastern products are found on U.S. government aircraft including the UH-60 Blackhawk, CH-47 Chinook, Airbus A400M transport and the Coast Guard's HH-65 Dolphin. Company CEO Brad Pedersen in a statement called Breeze-Eastern "an excellent addition" to TransDigm, arguing the sale will benefit shareholders, employees and customers.
"Being part of a larger aerospace company will allow for further growth opportunities and provide resources for Breeze-Eastern to continue developing the highly engineered life-saving products that we're known for today," Pedersen said.
TransDigm, an aerospace consolidator that makes a wide range of ignition systems, engine technology, specialized pumps and valves, cockpit displays, safety restraints and security items for military and civilian aerospace platforms, said in a statement it was attracted to the proprietary nature of many of Breeze-Eastern's products. The $2.5 billion-sales company has done at least five deals this year, including a $325 million purchase of Rancho Cucamonga Calif.-based hydraulic components maker PneuDraulics, which was announced in July.
Cowen and Co. analyst Gautam Khanna, in a note, sees potential facility consolidation opportunities, and says there is likely pricing power in Breeze-Eastern's aftermarket business. As important, the deal leaves TransDigm with upwards of $3 billion in available firepower if the company is levered to seven times net debt to Ebitda.