Rockwell Collins Inc. is acquiring B/E Aerospace Inc. for $6.4 billion in cash and stock, broadening its aerospace supplier business with the largest acquisition in the avionics company’s 83-year history.
B/E Aerospace investors will get $34.10 in cash and $27.90 in shares of Rockwell Collins common stock, for a total consideration of $62 a share, the companies said in a statement Sunday. That’s a 23% premium over B/E Aerospace’s closing price on Friday. With the assumption of $1.9 billion of debt, the purchase comes to $8.3 billion, according to the statement.
The deal, which is slated to close in early 2017, is the latest in a spate of mergers involving suppliers to Boeing Co. and Airbus Group SE as the commercial aircraft industry braces for slower growth following a decade-long sales cycle. Shares of Rockwell Collins have fallen 8.5% this year.
With the deal, Rockwell Collins vastly broadens a product portfolio that has been centered on aircraft communications and computing equipment since the Cedar Rapids, Iowa-based company was spun out of Rockwell International in 2001.
B/E Aerospace Inc. is the largest supplier of airline cabin equipment, ranging from luxurious seats as expensive as Ferrari to modular lavatories. On a pro-forma basis, the combined manufacturer would have almost 30,000 employees, $8.1 billion in revenue and $1.9 billion in earnings before interest, taxes, debt and amortization for the 12 months ended Sept. 30, 2016.
“This transformational acquisition is consistent with our strategy to accelerate growth and build value through market-leading positions in cockpit and cabin solutions,” Kelly Ortberg, chief executive officer of Rockwell Collins, said in the statement. “We see tremendous opportunity to better serve our commercial aviation, business jet and military customers through broader offerings.”
The boards of both companies have approved the transaction, which will still need to pass muster with shareholders.
Although there is little apparent overlap in the two companies’ product portfolios, Rockwell Collins has identified $160 million in potential synergies, the companies said. Werner Lieberherr, B/E Aerospace’s chief executive, will be named executive vice-president and chief operating officer of a newly created aircraft interiors division after the merger closes.
Separately, Rockwell Collins said profit from continuing operations in its fiscal fourth quarter rose to $1.58 a share, up from $1.38 a year earlier. Analysts expected adjusted earnings of $1.57, according to the average of 17 estimates compiled by Bloomberg.
Sales in the period rose 4.4% from a year earlier to $1.45 billion, trailing the average analyst estimate of $1.48 billion. Equipment sales were hurt by lower planemaker production rates, including Airbus’s A330 widebody jetliner, the company said. For its 2017 fiscal year, the company said it expects revenue between $5.3 billion and $5.4 billion -- that’s on a standalone basis, and doesn’t account for the deal with B/E Aerospace.
By Julie Johnsson