Goodrich Corporation (GR) has signed an agreement to acquire Microtecnica for approximately $462.0 million from the European private equity firm Stirling Square Capital Partners.
Microtecnica is the premier provider of flight control actuation systems for helicopter, regional and business aircraft, missile actuation, and aircraft thermal and environmental control systems. Stirling Square Capital Partners had bought the firm in July 2008 from a subsidiary of United Technologies Corporation (UTX). Microtecnica has significant sales in both the commercial aerospace and the defense and space markets. For full-year 2011, sales for business are anticipated to be approximately $220 million, and grow significantly over the next several years.
With approximately 25% of sales in the commercial and military helicopter markets, the acquisition is expected to strengthen Goodrich’s position in the key high-growth market. The company’s prime customers include AgustaWestland, Alenia, Hamilton Sundstrand, Avio, Bombardier and Eurocopter.
Total cash consideration reflects a multiple of approximately 11.5 times estimated adjusted earnings before interest, taxes, depreciation and amortization and is expected to be slightly accretive to earnings in 2011. The transaction is expected to close during 2Q11. After the acquisition, Microtecnica will become an integral part of Goodrich’s Actuation Systems business, within its Actuation and Landing Systems segment.
Goodrich is a global supplier of components and systems for communications and avionics. Most of the company’s products are sold to government and commercial customers that will lead to higher volume sales and will create economies of scale thus helping to win cost-sensitive government contracts. The company also provides niche equipment, which has a captive market until the retirement of the specific model.
However, these positives are offset by uncertainty in the large commercial airplane original equipment market, dependence on international sales, high research and development overheads and regulatory risks. Goodrich presently retains a short-term Zacks #2 Rank (Buy). We have a long-term Neutral recommendation on the stock.
Based in Charlotte, North Carolina, Goodrich Corporation supplies components, systems and services to the commercial, regional, business and general aviation markets in the U.S. and in other parts of the world. Goodrich also supplies aircraft and satellite systems to the global military and space markets. Goodrich’s products and services are principally sold to customers in North America, Europe and Asia.
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