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Curtiss-Wright Signs Agreement to Acquire 901D Holdings

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Curtiss-Wright Corporation (CW - Free Report) recently signed an agreement to purchase the stock of 901D Holdings, LLC for $132 million in cash. The acquisition is expected to conclude in December 2019, subject to the receipt of regulatory approval and other closing conditions.

On completion of the transaction, 901D Holdings will operate within Curtiss-Wright’s Defense segment.

How Will Curtiss-Wright Benefit?

The acquisition of 901D is expected to increase Curtiss-Wright’s footprint in critical U.S. Navy shipbuilding programs, as well as its instrumentation and controls system technologies. Moreover, Curtiss-Wright’s state-of-the-
art electronic systems and software capabilities combined with 901D’s mission-critical integrated electronic systems and subsystems will allow the former to provide shipboard solutions on both nuclear and non-nuclear-powered vessels for the U.S. naval fleet.

Alongside the aforementioned advantages, the agreement reinforces the acquirer’s long-term financial objectives, including increased sales, margin expansion and strong free cash flow generation. Subsequently, the acquisition is expected to be accretive to Curtiss-Wright’s 2020 adjusted diluted earnings per share and produce a free cash flow conversion rate in excess of 100%.

Rationale Behind the Deal & Other Acquisitions

In recent times, mergers and acquisitions have become a pivotal strategy for defense majors to expand into new markets, gain new capabilities and access emerging technologies. In particular, led by increasing geopolitical
tensions across the globe, developed as well as developing nations have increased their military spending over the last decade. This has expanded the realm of aerospace and defense market, which in turn has enticed defense primes to vigorously involve in mergers and acquisition deals for gaining larger shares of the market. We believe that the latest acquisition deal signed by Curtiss-Wright has also been influenced by these factors.

Following the same strategy, in June, Raytheon Company and United Technologies Corp. agreed to create a new company worth around $121 billion, which would be the sector’s biggest ever merger, till date. Similarly, aircraft manufacturing giant, Boeing (BA - Free Report) and Brazil-based Embraer (ERJ - Free Report) are working on establishing their partnership to deliver greater value to airline customers across the world and accelerate growth in global aerospace markets.

Zacks Rank & Price Performance

Curtiss-Wright currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the company have lost about 22.1% in the past six months against the industry’s growth of 17.9%.



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