TransDigm Group Inc.(TDG - Analyst Report) recently closed the acquisition of Arkwin Industries, Inc. in an all cash transaction worth approximately $286 million. The decision to acquire Arkwin was announced on May 16, 2013.
The acquisition is a strategic move by TransDigm as Arkwin’s nature of operation, commercial and military clients and products perfectly complement TransDigm’s existing portfolio. Through this acquisition, TransDigm will be able 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.
Based in Westbury, NY, Arkwin primarily designs, manufactures and produces hydraulic and fuel system components for civil and military fixed-wing aircraft, helicopters, spacecraft, 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 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.
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 major commercial 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 decision to acquire Arkwin is a part of TransDigm’s long-term plan of expanding its product range with better offerings 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 Inc. (HON - Analyst Report) having a Zacks Rank #2 (Buy).