Triumph Group Inc. (TGI) completed the Vought acquisition for $1.44 billion. On March 23, Triumph decided to acquire Vought Aircraft Industries Inc. from a private equity firm, The Carlyle Group. Triumph paid $525 million in cash and offered 7.5 million shares to Carlyle, which will have a 31% stake in Triumph. Triumph issued senior notes to fund the acquisition.
 
The acquired business will be operating as Triumph Aerostructures-Vought Commercial Division and Triumph Aerostructures-Vought Integrated Programs Division.
 
The acquisition is expected to be accretive to both fiscal years 2010 and 2011. Management expects the new business to be immediately accretive to earnings and add approximately $25 million of revenues in fiscal year 2011.
 
According to management, during 2010, earnings per share (EPS) will grow by 1 cent and in 2011 by approximately $1.10 per share owing to the acquisition. Total synergies are expected in the range of $12 to $15 million within a year or two.
 
Triumph remains focused on growing its core businesses as well as growing through strategic acquisitions. The company recently acquired Fabritech Inc., a leading component manufacturer and repair station for critical military rotary-wing platforms.
 
Organic growth remained strong in fiscal 2009 with the addition of new products and services, the expansion of operating capacity and marketing of a complete portfolio of capabilities, which will continue in the future.
 
However, Triumph’s dependence on government spends and on Boeing Company (BA), its largest customer, do not inspire confidence. Moreover, we do not see any significant recovery in the delivery of new commercial aircraft in the medium term. Thus, we reiterate our Neutral recommendation.
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