TransDigm Group Inc. (TDG - Analyst Report) recently signed a definitive agreement to acquire Arkwin Industries, Inc. The deal is an all cash transaction and is valued at approximately $286 million.
The acquisition is a strategic move by TransDigm as the nature of operation, commercial and military clients and products of Arkwin perfectly complement TransDigm’s existing portfolio. Through this acquisition, TransDigm will be able to leverage Arkwin’s proprietary highly engineered aerospace hydraulic and fuel system components for commercial and military aircraft, helicopters and other specialty applications, thereby enhancing the growth prospects for TransDigm.
Based in Westbury, NY, Arkwin primarily designs, manufactures and produces hydraulic and fuel system components for civil and military fixed-wing aircrafts, helicopters, spacecrafts, turbine engines and special applications. Its products include hydraulic subsystems, hydraulic swivel joints, actuators, fuel control valves, reservoirs, hydraulic valve modules, and hand pumps.
In the year 2012, Arkwin generated revenues of about $95 million and its aftermarket services accounted for about 40% of its revenues while the commercial market contributed approximately 50% of the consolidated revenue. Similarly TransDigm also generates about 57% of its net revenue from aftermarket.
The acquisition of Arkwin is a good fit for TransDigm in every way. Apart from product line synergies, with Arkwin on board, TransDigm will further strengthen its relations with its important customers like The Boeing Company (BA - Analyst Report), Airbus and Embraer SA (ERJ - Analyst Report). This is because Arkwin’s majorcommercial end-use platforms include the Boeing 737 and 777, Airbus 320, and Bombardier and Embraer regional jets. In addition, Arkwin also holds a strong presence in the ground based aero derivative turbine engines. The acquisition is expected to close in the third quarter of 2013, subject to customary closing conditions.
The decision to acquire Arkwin is a part of TransDigm’s long-term plan of expanding its product range with better offering to the aerospace industry. Prior to this, 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.
TransDigm currently has a Zacks Rank #3 (Hold). However, another company operating in the same industry and worth considering at the moment is Honeywell International (HON - Analyst Report) having a Zacks Rank #2 (Buy).