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Rockwell Collins is set to acquire B/E Aerospace for approximately $6.4 billion in cash and stock, plus the assumption of $1.9 billion in net debt.
The transaction combines Rockwell Collins’ capabilities in flight deck avionics, cabin electronics, mission communications, simulation and training, and information management systems with B/E Aerospace’s range of cabin interior products, which include seating, food and beverage preparation and storage equipment, lighting and oxygen systems, and modular galley and lavatory systems for commercial airliners and business jets.
The acquisition significantly increases Rockwell Collins’ scale and diversifies its product portfolio, customer mix and geographic presence. On a pro forma basis, Rockwell Collins would have nearly 30,000 employees, $8.1 billion in revenues and $1.9 billion in EBITDA for the 12 months ending 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,” said Kelly Ortberg, chairman, president and chief executive officer of Rockwell Collins. “We see tremendous opportunity to better serve our commercial aviation, business jet and military customers through broader offerings.”
“B/E Aerospace has a leading position in nearly all the segments it serves and a highly visible, long-cycle backlog,” Ortberg continued. “Beyond new aircraft deliveries, its $12 billion installed base provides a strong flow of aftermarket retrofit opportunities that balances our current cyclical exposure to OEM [original equipment manufacturer] production rates. Additionally, our combined portfolio uniquely positions us to integrate cabin products, smart network technologies and connectivity solutions to significantly enhance aircraft uptime and airline profitability while improving the experience of passengers and airline personnel.
“We expect to generate significant run-rate cost synergies and over $6 billion in free cash flow over the next five years with expected free cash flow conversion of greater than 100 per cent. In addition, by leveraging our respective airline and OEM relationships, as well as Rockwell Collins’ business jet dealer network and military aircraft positions, we firmly believe there are revenue synergies that create meaningful upside to our business case,” said Ortberg. “I’m excited to welcome B/E Aerospace’s talented employees and bring together two industry leaders with complementary capabilities and strong reputations for innovation, quality and delivering sustained customer value.”
“Our combination with Rockwell Collins represents an excellent outcome for B/E Aerospace’s stockholders, who will receive an immediate premium as well as a substantial equity interest in a strong combined company with a broader range of products, customers, and the combined expertise and resources to create future value,” said Amin Khoury, B/E Aerospace founder and chairman. “We feel confident that this combination delivers significant long-term benefits neither company could realize on its own. We look forward to becoming part of Rockwell Collins and leveraging their technology to accelerate our long-term growth as we embark on the next chapter in the company’s history.”
Under the terms of the agreement, each B/E Aerospace shareowner will receive total consideration of $62 per share, comprised of $34.10 per share in cash and $27.90 in shares of Rockwell Collins common stock, subject to a 7.5 per cent collar. This represents a premium of 22.5 per cent to the closing price of B/E Aerospace common stock on Oct. 21, 2016.
Upon completion of the transaction, which is expected in the spring of 2017, current B/E Aerospace shareowners will own approximately 20 per cent of the combined company.
The transaction, which was unanimously approved by the boards of directors of both companies, is subject to the approval of Rockwell Collins and B/E Aerospace shareowners, regulatory approvals and other customary conditions.
