TransDigm Group Incorporated (TDG - Analyst Report) completed the acquisition of Airborne Systems Inc from Metalmark Capital, in an all-cash deal valued at approximately $250 million. The decision to acquire Airborne was previously announced on Dec 2 and was scheduled to complete by the first quarter of 2014.
The acquisition is a strategic move by TransDigm as the nature of operation, commercial and military clients and products of Airborne Systems perfectly complement TransDigm’s existing portfolio. Through this acquisition, TransDigm will be able to leverage Airborone’s proprietary personnel parachutes, cargo aerial delivery systems, emergency escape systems, naval decoys and other related products; thereby enhancing the growth prospects for TransDigm.
Airborne Systems is owned by Metalmark Capital, a leading private equity firm investing in targeted sectors. Headquartered in New Jersey, Airborne Systems is the leading designer and manufacturer of personnel parachutes, cargo aerial delivery systems, emergency escape systems, naval decoys and other related products. Apart from the U.S. government, 50 other countries including the U.K. rely on the company's highly proprietary products. Airborne’s products also include current generation troop parachutes, latest generation steerable parachutes for tight-drop zone landings, and the ram-air, maneuverable parachute systems used for special operations. The company's precision-guided cargo parachutes are used for high altitude GPS-driven cargo drops.
In 2013, Airborne generated revenues of about $160 million. Domestic customers account for about 45% of the revenues while international customers contributed approximately 55%. Therefore, the large international customer base is expected to provide a buffer for TransDigm, given the uncertainties of the U.S. defense spending environment.
TransDigm will further strengthen its presence in the military or defense market, one of the primary revenue streams for TransDigm.
Based in Cleveland, Ohio, TransDigm Group has recently been pursuing strategic acquisitions to consolidate its presence in the aerospace industry. All the acquisitions that the company has been making are accretive to earnings and revenues. In the last reported quarter (fourth-quarter 2013), both earnings of $1.75 and revenues of $539.7 million surpassed the corresponding Zacks Consensus Estimate of loss of 18 cents and revenues of $538 million. This apart, both improved year on year primarily driven by the positive synergies from the acquisitions.
TransDigm currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the aerospace sector include Alliant Techsystems Inc. , Teledyne Technologies Inc. (TDY - Snapshot Report) and Precision Castparts Corp. . While Alliant Techsystems carries a Zacks Rank #1 (Strong Buy), Teledyne and Precision Castparts holds a Zacks Rank #2 (Buy).