Rockwell Collins to acquire B/E Aerospace

Posted on 25 Oct 2016 by Michael Cruickshank

Aircraft avionics producer Rockwell Collins has this week announced plans to acquire aviation interior fitter B/E Aerospace.

According to a statement by Rockwell Collins the deal will be worth a total of $6.4bn , with shares of the acquired company being bought for a price of $62 a share in cash and stock.

In addition to this, Rockwell Collins will also assume $1.9bn in debt from B/E Aerospace.

“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, CEO of Rockwell Collins.

While both companies are involved in creating and fitting components for the interiors of aircraft, prior to the deal there was very little overlap between the two’s business models.

Rockwell Collins produces the interior avionics, flight control systems, and connected entertainment surfaces within both commercial and military jets.

Meanwhile, B/E Aerospace is well-known for fitting the cabins of aircraft with seating, lavatories, galleys and lighting.

Rockwell Collins believes that given the two companies are involved in a similar field, they can synergise their business and save on long-term costs.

The company projects that it can create pre-tax ‘cost synergies’ of $160m, and can generate $6 billion in free cash flow over five years through the acquisition of B/E Aerospace.

They also see the two companies’ respective, yet differing business relationships as another key area of opportunity once the deal is closed.

“…by leveraging our respective airline and OEM relationships, as well as Rockwell Collins’ business jet dealer network and military aircraft positions, we firmly believe there are revenue synergies that create meaningful upside to our business case,” said Kelly Ortberg.

Together both companies have over 30,000 employees, however there is yet to be any word on if all of these positions will remain post-acquisition.

Despite the rosy picture painted by the company, investors have reacted negatively, with Rockwell Collins’ share price dropping by approximately 5% upon the announcement of the deal.