Blog Coverage Rockwell Collins and B/E Aerospace's $8.3 Billion Deal Gets the European Commission's Blessings
Upcoming AWS Coverage on L3 Technologies
LONDON, UK / ACCESSWIRE / April 13, 2017 / Active Wall St. blog coverage looks at the headline from Rockwell Collins, Inc. (NYSE: COL). The European Commission (EC) on April 12, 2017, gave its unconditional approval for the proposed Rockwell Collins' takeover of B/E Aerospace, Inc. (NASDAQ: BEAV) under the EU Merger Regulation. Register with us now for your free membership and blog access at:
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One of Rockwell Collins' competitors within the Aerospace/Defense Products & Services space, L3 Technologies, Inc. (NYSE: LLL), is expected to report its fiscal quarter ending March 2017 earnings results on April 27, 2017 before market open. AWS will be initiating a research report on L3 Technologies following the release of its next earnings results.
Today, AWS is promoting its blog coverage on COL and BEAV; touching on LLL. Get all of our free blog coverage and more by clicking on the link below:
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EC's Ruling
The EC decided that the takeover does not raise any competition concerns as both are in different business verticals and there is no overlap in businesses between the two Companies. Rockwell Collins specializes in avionics and cabin electronics products whereas B/E Aerospace specialises in aircraft cabin interior products like seats, lighting, oxygen systems and galley equipment. The EC also noted that the merger of Rockwell Collins and B/E Aerospace and their business would not exclude other operators in these markets. Even after the Rockwell Collins and B/E Aerospace merger, there will remain many other manufacturers and suppliers of similar aviation and cabin interior products who will compete for opportunities available in the market. The EC's ruling came after a routine review of the deal.
Rockwell Collins and B/E Aerospace deal
Cedar Rapids, Iowa based Aircraft component maker Rockwell Collins had announced the acquisition of Wellington, Florida based aircraft interior maker B/E Aerospace in October 2016 for $8.3 billion. The amount included $6.4 billion in cash and stock, plus B/E Aerospace's debt of $1.9 billion.
Rockwell Collins agreed to pay $62.00 per share for each B/E Aerospace's share. This included $34.10 per share in cash and $27.90 in shares of Rockwell Collins' common stock. Once the deal is completed B/E Aerospace's shareholders will own nearly 20% stake in the merged Company.
The deal is expected to result in run-rate pre-tax cost synergies of approximately $160 million. Certain changes in its accounting which would lead to further pre-tax earnings of approximately $60 million to $90 million per year for the first six years after the completion of the merger. The deal is also expected to be accretive to earnings per share in double digits in the first full fiscal year. The deal is expected to be completed in H1 2017.
Rockwell Collins plans to finance the cash deal using fresh debt for which it has already received commitments. It plans to pay of B/E Aerospace's debt of $1.5 billion by end of its fiscal 2019. The Company will curtail its share repurchase program to make up for the debt repayment.
The acquisition will not only increase Rockwell Collins' geographical footprint and customer base but also diversify its product portfolio. The Company will gain entry into the commercial aerospace equipment purchases and aftermarkets retrofit opportunities. The merger will result in Rockwell Collins having approximately 30,000 employees, $8.1 billion in revenues, and $1.9 billion in EBITDA for the one year period ending on September 20, 2016, on a pro-forma basis.
The Board of Directors of both Companies had already approved the deal at the time of signing the merger agreement. The shareholders of both Companies voted in favor of the merger on March 09, 2017.
Now that the merger has received the blessings of the EC, Rockwell Collins will be able to complete the transaction within the targeted timeline.
Aircraft manufacturing giants The Boeing Company and Airbus SAS have been attempting to reduce costs and have been putting pricing pressure on its suppliers. This could be one of the reasons for the Rockwell Collins and B/E Aerospace merger. This deal could just be a precursor and one can expect more deals in this space in the future.
Stock Performance
On Wednesday, April 12, 2017, the stock closed the trading session at $97.99, slipping 1.37% from its previous closing price of $99.35. A total volume of 940.35 thousand shares have exchanged hands. Rockwell Collins' stock price advanced 0.05% in the last month, 8.62% in the past three months, and 19.41% in the previous six months. Furthermore, since the start of the year, shares of the Company have gained 6.02%. The stock is trading at a PE ratio of 17.47 and has a dividend yield of 1.35%. Rockwell Collins' market capital is at $12.95 billion.
B/E Aerospace shares closed at $64.47 on April 12, 2017, with a marginal dip of 0.68%. Approximately 483.13 thousand shares were exchanged during the day's trade. The stock performance for the month and the quarter were a positive 0.28% and 5.59%. The stock performance for the year was 35.80%. Shares of the Company have a dividend yield of 1.30% and a market capital of $6.58 billion. The stock is trading at a price to equity ratio of 20.91.
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