In an all cash deal, TransDigm Group Incorporated (TDG - Analyst Report) will be acquiring the assets of General Electric Company (GE - Analyst Report) Aviation’s Electromechanical Actuation Division for roughly $150 million. Subject to regulatory requirements, the transaction is expected to close by the end of the third quarter of 2013.
Post-acquisition, TransDigm will operate the business through a new unit, Whippany Actuation Systems. Based in Whippany, NJ, this company primarily engages in manufacturing flagship aerospace electromechanical motion control subsystems for civil and military applications.
The acquisition is a part of TransDigm’s long-term strategy to acquire aerospace businesses with significant aftermarket content. In addition, GE Aviation's Electromechanical Actuation Division’s products are used on many commercial platforms with OEM and aftermarket growth opportunities. Therefore, the business perfectly complements the existing business of Whippany Actuation Systems. For 2013, Whippany revenues are expected at $80 million, out of which aftermarket sales will contribute about 40% and commercial market will account for 50%.
GE Aviation is the world's leading producer of large and small jet engines for commercial and military aircraft. The company’s engines are primarily used by leading aerospace and aircraft manufacturing companies like The Boeing Company (BA - Analyst Report), Precision Castparts Inc. , Airbus etc for commercial end use. These engines also align well with Whippany’s product offerings and customers. Whippany’s product offerings include control electronics, motors, high power mechanical transmissions and actuators.
TransDigm has been acquiring aerospace companies of late. In Apr 2013, TransDigm had acquired Aerosonic for approximately $39 million. Through this acquisition, TransDigm intends to leverage Aerosonic’s proprietary air data and display technologies with the help of its broad market presence and financial strength, thereby enhancing its growth prospects. In June, the company closed the acquisition of Arkwin Industries, Inc. in an all cash transaction worth approximately $286 million. Through this acquisition, TransDigm intends to leverage Arkwin’s highly engineered aerospace hydraulic and fuel system components for commercial and military aircraft, helicopters and other specialty applications, thereby enhancing its growth prospects.
TransDigm currently has a Zacks Rank #3 (Hold).