AAR Grabs Telair and Nordisk

AAR Corp. (AIR - Analyst Report) recently completed the acquisition of Telair International GmbH (Telair) and Nordisk Aviation Products, AS (Nordisk) from Teleflex Incorporated (TFX - Snapshot Report).

On October 21, 2011, AAR CORP. had signed a definitive agreement to purchase Telair and Nordisk from Teleflex Incorporated for $280 million.

Telair is a leader in the design, manufacture and support of cargo loading systems for wide-body and narrow-body aircraft. Telair provides standard container-based systems for Airbus A330/340 aircraft types, as well as the future Airbus A350 and recently launched Boeing 747-800. Telair generates 40% of total revenues from aftermarket spares and support for its installed base of cargo systems.

On the other hand, Nordisk designs and manufactures heavy-duty pallets and lightweight cargo containers for commercial airlines from facilities in Norway and China.

Wood Dale, Illinois based AAR Corp.provides various products and services to the aviation and defense industries worldwide.

The acquisition will significantly strengthen AAR’s commercial manufacturing business and enable the company to capitalize on commercial aircraft build cycles as a Tier-1 supplier to Airbus and The Boeing Company (BA - Analyst Report). The acquisition will also provide significant aftermarket opportunity to AAR as Telair systems are installed on more than 4,000 aircraft.

AAR will revise its guidance to incorporate the acquisition and provide it with its Investor Day Conference. The transaction is expected to generate approximately $225 million of revenues in 2013 and will be immediately accretive to margins. The acquisition will positively impact the bottom-line by $0.20 – $0.25.

The acquired business will operate as a part of AAR’s Structures and Systems segment. The combined business of Telair and AAR Cargo Systems will make AAR a strong player in the design, production and servicing of aircraft cargo systems for both commercial and military platforms. Management expects the company to achieve significant operational synergies, leading to further margin improvements and accretion in the coming quarters.

We continue to maintain a Neutral recommendation on AAR Corp. Our recommendation is supported by a Zacks #3 Rank, which translates into a short-term rating of Hold.

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