Triumph Shareholders OK Acquisition – Analyst Blog

The acquisition of Vought Aircraft Industries Inc. from the private equity firm Carlyle Group was approved by 99% of the shareholders of Triumph Group Inc. (TGI). The deal was finalized for $1.44 billion including the retirement of Vought debt.  

According to the agreement, Triumph will pay $525 million in cash and offer 7.5 million shares to Carlyle, which is expected to have a 31% stake in Triumph. The deal is expected to close by July 2010.

The acquisition is expected to be accretive to fiscal 2010 earnings by 1 cent. 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.

The acquired business will operate as Triumph Fabrications–St. Louis and be a part of Triumph Aftermarket Services Group. Management expects the new business to be immediately accretive to earnings and add approximately $25 million of revenue in fiscal year 2011.

 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, is discouraging. 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.