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TransDigm (TDG) Acquires Cobham Aero Connectivity for $965M

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TransDigm Group Incorporated TDG has recently finalized the purchase of Cobham Aero Connectivity for approximately $965 million in cash, including tax benefits. A portion of the acquisition, representing approximately 2% of the total purchase price, still remains subject to Finnish regulatory approval, which is expected to close in the coming weeks.

Rationale Behind the Buyout

In recent times, a rising focus on cost-reduction initiatives, widespread competition and a desire for increased control over production procedures have prompted players from the defense industry to engage in mergers and acquisitions. Such transactions have increasingly gained importance, which enables companies to achieve desired growth by expanding operations, having access to new capabilities and emerging technologies, ultimately leading to enhanced quality of products and services and increased shares in growing markets.

TransDigm to Benefit From Cobham Aero Acquisition

As stated by TransDigm’s president and chief executive officer, Mr. Kevin Stein, the acquisition of Cobham Aero will be highly beneficial for the former in the expansion of its footprint, as the latter has an established and strong presence across a diverse range of helicopters and fixed-wing aircraft. Notably, its existing customer base includes big names such as Boeing BA, Raytheon Technologies, Airbus, AgustaWestland/Leonardo and Elbit. So, adding Cobham Aero to its portfolio will enhance TransDigm’s business volumes, thereby boosting its operational results.

Further, the company expects to witness significant opportunities for the ongoing upgrade and retrofit activities as the demand for faster data-intensive communication continues to grow. The acquisition is also expected to create an equity value in line with TransDigm's long-term private equity-like return objectives.

Other Acquisitions Boosting Defense Space

Toward the end of July 2020, BAE Systems BAESY completed the acquisition of the Collins Aerospace Military Global Positioning System (GPS) business from Raytheon Technologies.

In December 2020, Lockheed Martin LMT agreed to acquire Aerojet Rocketdyne Holdings for approximately $5 billion, which is expected to close in the second half of 2021.

Price Movement & Zacks Rank

In the past six months, shares of TransDigm have surged 42.8% compared with the industry’s 25.4% growth.

TransDigm currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The Boeing Company (BA) : Free Stock Analysis Report
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