B/E Aerospace's Canadian division (Winnipeg office shown here) does business with several OEMs and aerospace equipment manufacturers, including Pilatus, Gulfstream, Viking, Thales and Conair.
B/E Aerospace will become a segment of Rockwell Collins, the executives said. The transaction should be finalized by spring 2017.
Shares of Rockwell Collins have tumbled 7% to $78.59 at 12:33 p.m. today, while B/E Aerospace has jumped 15% to $58.43. This represents a premium of 22.5 per cent to the closing price of B/E Aerospace common stock on Friday, Oct. 21, 2016. B/E, based in Wellington, Florida, makes aircraft cabin interiors including seating, storage and lavatory systems.
The acquisition significantly increases Rockwell Collins' scale and diversifies its product portfolio, customer mix and geographic presence. Still, Breach said, despite expected cost savings from combining Rockwell and B/E, "we can not clearly see the strategic synergy here".
"And it will almost double our position in the narrowbodies", Chief Executive Officer Kelly Ortberg said on a conference call with analysts, referring to top-selling jets such as the Boeing 737 and Airbus A320. He said B/E's strong relationships with airline customers would complement Rockwell's strength with business jet and military customers.
"B/E Aerospace has a leading position in almost all the segments it serves and a highly visible, long-cycle backlog", Rockwell CEO Kelly Ortberg said in the release.
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The $6.4 billion purchase of B/E Aerospace eclipses the 83-year-old avionics maker's takeover of Arinc in 2013. "We feel confident that this combination delivers significant long-term benefits neither company could realize on its own". According to the Wall Street Journal, the merger will provide the combined company with over 10 million client accounts and about $1 trillion in assets.
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.
The proposed deal, confirmed by the companies on Sunday, continues the consolidation of the aerospace industry over the past two years as suppliers adjust to pressures from Airbus Group SE AIR, -0.02% and Boeing Co.
Rockwell will also assume $1.9 billion in net debt.
In afternoon trading Monday, shares of Rockwell fell nearly 6 percent while B/E shares jumped nearly 16 percent. B/E Aerospace gained nearly 20 percent this year through Friday, while Rockwell Collins had declined 8.5 percent.
Both companies have operations in Southern California.