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B/E Aerospace on a Buying Spree

Zacks Equity Research

B/E Aerospace Inc. (BEAV), a manufacturer of products for aircraft interiors, recently signed definitive agreements to acquire two manufacturing aerospace businesses for about $470 million. Though the company did not divulge its plans for funding these acquisitions it may use its existing cash balance and raise funds from the issue of new debts.

Per an agreement, B/E Aerospace would acquire EMTEQ, Inc., a provider of aircraft lighting, cabin management and power systems. The company is also set to add F+E Fischer + Entwicklungen GmbH & Co. KG (Fischer), which manufactures seating products for civilian helicopters. The EMTEQ deal is slated to complete by this month, while the Fischer transaction will complete around the beginning of the third quarter of 2014.

The acquisition of EMTEQ will facilitate the company to offer entire aircraft lighting and engineering integration solutions and additional product and service assistance in various aircraft platforms. The second acquisition will bring substantial engineering, manufacturing and marketing synergies to the company on the back of Fischer’s patent protected seat security system.

EMTEQ and Fischer have together generated total revenues of about $150 million for the 12 months ended Mar 31, 2014. These deals are expected to be accretive to B/E Aerospace’s earnings per share in 2015 and 2016. The company will record a one-time charge of $10 million for the acquisitions in the second quarter of 2014.

B/E Aerospace has a focused acquisition program that helps deliver advanced offerings to its commercial airliners, helicopters and business jet customers. In the first quarter 2014, the company acquired LT Energy Services and Wildcat Wireline for $257 million.

The company maintains a healthy cash position. Cash and cash equivalents at the end of Mar 31, 2014 were $384.7 million, down from $531.5 million at the end of Mar 31, 2013. The year-over-year decline was primary due to the funding of acquisitions.

Currently, the company holds a Zacks Rank #3 (Hold). Other well-ranked defense players include American Science & Engineering Inc. (ASEI), CAE Inc. (CAE) and Curtiss-Wright Corp. (CW). All of these stocks hold a Zacks Rank #2 (Buy).

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