TransDigm Acquires AmSafe

TransDigmGroup Incorporated (TDG - Analyst Report) now includes AmSafe Global Holdings Inc. with the completion of the acquisition of this leading supplier of innovative, highly engineered and proprietary safety and restraint equipment used mainly in the global aerospace industry. The acquisition worth approximately $750 million  was made  on a cash free, debt free basis from a group controlled by Berkshire Partners LLC and Greenbriar Equity Group LLC. Initially, the acquisition was announced on January 20, 2012.

Popular for its proprietary aviation passenger seatbelts and airbags, AmSafe generated revenues of about $260 million in 2011. More than 90% of the aircraft worldwide are using AmSafe’s products. Further, Amsafe is the only company to have a seatbelt airbag system installed worldwide on both commercial transport and general aviation aircraft. The company also makes different type of cargo and restraint products.

TransDigm competes on the basis of engineering, manufacturing and marketing of high quality products that meet or exceed the performance and maintenance requirements of customers through consistent and timely delivery along with superior customer service and support. The industry’s stringent regulatory certification and technical requirements with huge investment necessary for the development and certification of products, create barriers to entry for potential new competitors. As long as customers receive products that meet or exceed expectations and maintain performance standards, they will have a reduced incentive to certify another supplier due to the cost and time of the technical design and testing certification processes. In addition, concerns regarding safety and flight delays, if products are unavailable or not dependable, are reasons for its customers to continue their long-term supplier relationships.

TransDigm Group’s business is sensitive to the number of flight hours that its customers’ planes spend aloft, the size and age of the worldwide aircraft fleet and customers’ profitability. These items are, in turn, affected by general economic conditions. Further, the military and defense market is significantly dependent upon government budget trends, particularly the DOD budget. In addition to normal business risks, its supply of products to the United States Government is subject to unique risks largely beyond its control. Major competitors of the company are Goodrich Corp. (GR - Analyst Report), Honeywell International Inc. (HON - Analyst Report) and United Technologies Corp. (UTX - Analyst Report).

Based in Cleveland, Ohio, TransDigm Group Inc.designs, produces, and supplies engineered aircraft components for use on commercial and military aircraft. The company operates principally in the US.

We maintain a Zacks #2 Rank (short-term Buy recommendation) on TransDigm.

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