US aircraft component maker Rockwell Collins announced Sunday it will acquire aircraft interior maker B/E Aerospace for roughly $6.4 billion in a cash-and-stock transaction.
"This transformational acquisition is consistent with our strategy to accelerate growth and build value through market-leading positions in cockpit and cabin solutions", Rockwell Collins Chairman, President and CEO Kelly Ortberg said in the statement.
It added that the deal will be "double-digit accretive to earnings per share in first full fiscal year with expected combined five-year free cash flow generation in excess of $6 billion".
Pricing pressures from Boeing Co and Airbus are one driver of such a deal. This represents a premium of 22.5 per cent to the closing price of B/E Aerospace common stock on Friday, Oct. 21, 2016.
Its manufactured products include aircraft cabin seating, lighting systems, oxygen systems, food and beverage preparation and storage equipment, galley systems, and modular lavatory systems. If the deal is completed, Rockwell will have almost 30,000 employees about $8 billion in annual revenue. Its largest before that was its $1.4 billion purchase of Arinc in 2013.
Aftermarket sales also would help offset weakness in other parts of the combined company.
B/E Aerospace plans to use Rockwell's dealer network and relationships with business jet owners, for example, to know when jets are coming in for avionics upgrades. Rockwell Collins estimates annual run rate cost synergies at $160M, equivalent to 5% of B/E Aerospace revenues.
Regulators and shareholders still have to approve this deal.
Sales in the period rose 4.4 percent from a year earlier to $1.45 billion, trailing the average analyst estimate of $1.48 billion. Khoury said the company he built, from $3 million in 1987 to now $3 billion in revenues, will be in "competent hands" as he retires.