Woodward (WWD) - Get Woodward Inc. Report -- an aerospace parts maker once believed to be an acquisition target of Boeing (BA) - Get The Boeing Company Report -- is merging with Hexcel (HXL) - Get Hexcel Corporation Report, a company that makes lightweight materials for aircraft, space and defense equipment, said the two companies Sunday.
Under the so-called "merger of equals" deal, current Woodward shareholders will own a little over half -- about 55% -- of the new company called Woodward Hexcel. Hexcel shareholders will own about 45%.
Hexcel shareholders will get 0.625 shares of Woodward common stock for each share of Hexcel common stock -- which equals about $76.23 based on Friday's close for Woodward. Woodward shareholders get to keep the same number of common stock shares in the newly combined company as before.
Also, as part of the deal, Woodward is raising its quarterly cash dividend to 28 cents a share.
The combined company to be based in Colorado would create a major aerospace and defense supplier with some 16,000 employees, operations in 14 countries and estimated net revenues of $5.3 billion.
Hexcel's chief executive Nick Stanage will stay on as the CEO and Woodward's current chief, Tom Gendron, will become the executive chairman for a year.
“Our two companies are each independently working toward addressing the sustainability and efficiency needs of our customers," said Gendron in a statement. "This merger accelerates our technology investments and creates greater benefits and growth opportunities than either company could have achieved alone.”
Woodward Hexcel plans to invest $250 million on research and development in its first year, and it expects to save around $125 million in "annual cost synergies" by its second fiscal year.
Hexcel had closed Friday trading on the New York Stock Exchange down to $72.91 and Woodward to $121.96 on Nasdaq.