TransDigm Group Incorporated (NYSE: TDG) and Esterline Technologies Corporation (NYSE:ESL) announced today that they have entered into a definitive agreement under which TransDigm will purchase all of the outstanding shares of common stock of Esterline for $122.50 per share in cash, which represents a premium of 38% to Esterline’s closing price on October 9, 2018, or a total transaction value of approximately $4.0 billion including the assumption of debt. The transaction has been approved by the Boards of Directors of both companies. TransDigm expects the acquisition to be financed primarily through cash on hand and the incurrence of new term loans, and currently anticipates the acquisition to be modestly accretive to TransDigm’s adjusted earnings per share within the first year of ownership.
The acquisition of Esterline expands TransDigm’s platform of proprietary and sole source content for the aerospace and defense industries, including significant aftermarket exposure. Headquartered in Bellevue, Washington, Esterline is an industry leader in specialized manufacturing for these sectors with anticipated fiscal year 2018 revenue of approximately $2.0 billion. The company consists of 28 business units organized across eight platforms to deliver specialty aerospace, defense and industrial products. The company employs over 12,500 employees in more than 50 operating locations throughout the world.
Esterline has attractive platform positions in both the OEM and aftermarket and has substantial content on many important commercial aircraft variants, many regional and business jet aircraft and major defense platforms.
“We are pleased to have reached agreement to acquire a collection of businesses that fit well with our focused and consistent strategy,” stated W. Nicholas Howley, TransDigm's Executive Chairman. “Esterline’s core aerospace and defense business consists of primarily proprietary, sole source products with significant and growing aftermarket exposure. We view this as highly complementary to our existing business. We are confident that the combination of Esterline’s leading positions and our proven track record of driving performance will enable us to deliver the private equity-like returns our investors have come to expect from this investment."
Kevin Stein, TransDigm’s President and Chief Executive Officer stated, “We are excited to acquire Esterline’s wide range of complementary products and see a path to create significant value for TransDigm shareholders, customers and stakeholders. Upon completion of the transaction, Bob Henderson, TransDigm’s current Vice-Chairman, will oversee the integration and operations of Esterline. Mr. Henderson has been a key member of TransDigm’s management team for close to 25 years and has overseen the integration of numerous acquisitions during this period, including our recent acquisition of Kirkhill from Esterline.”
“Our combination with TransDigm delivers a compelling value for our shareholders,” said Curtis Reusser, Chairman, President and Chief Executive Officer of Esterline. “I am pleased with the outcome of our thoughtful strategic review process, and we believe it is the best result for all Esterline stakeholders. I am very proud of the commitment and focus of our employees to serving the needs of our customers, and I am confident the combined companies will be well positioned to succeed in the global market we serve.”
The acquisition will be financed through a combination of existing cash on hand of approximately $2 billion and the incurrence of new term loans. TransDigm has obtained commitments for the full amount of financing required for the transaction. Immediately upon closing, the combined company will maintain the financial flexibility to meet any anticipated operating, acquisition, and other opportunities that may arise though a combination of cash on hand, undrawn revolver, and under certain circumstances, additional availability under its credit agreement.
The transaction is subject to customary closing conditions, including Esterline stockholder approval and the receipt of required regulatory approvals. The companies expect to complete the transaction in the second half of calendar 2019.
Morgan Stanley & Co. LLC acted as financial advisor to TransDigm. Wachtell, Lipton, Rosen & Katz and Baker & Hostetler LLP acted as TransDigm's lead legal counsel. Goldman Sachs & Co. LLC acted as financial advisor to Esterline and Evercore Group L.L.C. served as advisor to Esterline’s Board of Directors. Skadden, Arps, Slate, Meagher & Flom served as legal counsel to Esterline.