Rockwell Collins to buy aircraft interior maker B/E Aerospace for $6.4 bn

Rockwell Collins, a US-based aircraft component maker, yesterday struck a deal to buy aircraft interior maker B/E Aerospace for $6.4 billion in cash and stock, the largest acquisition in its 83 year history.

Under the terms of the deal that has been approved by the boards of both companies, B/E Aerospace shareholders will get $34.10 in cash and $27.90 in shares, for a total consideration of $62 a share, a 23 per cent premium over B/E Aerospace's Friday closing price.

With the assumption of $1.9 billion of debt, the total purchase price is $8.3 billion.

The merger is expected to produce cost synergies of about $160 million and provide a double-digit lift to per-share earnings in the first full year, the companies said in a statement.

Post closing, expected in the spring of 2017, B/E Aerospace shareholders will own around 20 per cent of the combined company.

Rockwell Collins expects to finance the cash portion of the transaction with debt financing. It plans to pay down $1.5 billion of the new debt by the end of its fiscal 2019 while curtailing its share repurchase program to a level sufficient to offset dilution.

Iowa-based Rockwell Collins has a market cap of about $11 billion, more than twice the $5.1 billion of B/E Aerospace.

The transaction combines Rockwell Collins' capabilities in flight deck avionics, cabin electronics, mission communications, simulation and training, and information management systems with B/E Aerospace's range of cabin interior products, which include seating, food and beverage preparation and storage equipment, lighting and oxygen systems, and modular galley and lavatory systems for commercial airliners and business jets.

Rockwell Collins said that the acquisition significantly increases its scale and diversifies its product portfolio, customer mix and geographic presence.

Post closing, Rockwell Collins would have nearly 30,000 employees, $8.1 billion in revenues and $1.9 billion in EBITDA for the twelve months ending 30 September 2016.

''This transformational acquisition is consistent with our strategy to accelerate growth and build value through market-leading positions in cockpit and cabin solutions,'' said Kelly Ortberg, chairman, president and CEO of Rockwell Collins.

''Additionally, our combined portfolio uniquely positions us to integrate cabin products, smart network technologies and connectivity solutions to significantly enhance aircraft uptime and airline profitability while improving the experience of passengers and airline personnel,'' he added.

B/E Aerospace founder and chairman, Amin Khoury, said, ''Our combination with Rockwell Collins represents an excellent outcome for B/E Aerospace's stockholders, who will receive an immediate premium as well as a substantial equity interest in a strong combined company with a broader range of products, customers, and the combined expertise and resources to create future value.''

B/E Aerospace, based in Florida, is one of the world's largest makers of aircraft seats and other interior fittings such as galleys. 

Its manufactured products include aircraft cabin seating, lighting systems, oxygen systems, food and beverage preparation and storage equipment, galley systems, and modular lavatory systems.

B/E Aerospace also provides cabin interior reconfiguration, program management and certification services.

Rockwell Collins design and produces in flight-deck avionics, cabin electronics, mission communications, information management and offers simulation and training to customers in aerospace and defense.

Its aviation electronics systems and products are installed in the flight decks of nearly every air transport aircraft in the world, while its communication systems transmit nearly 70 per cent of US and allied military airborne communications.

It has 20,000 employees working at 150 countries and has an annual turnover of $5.4 billion.