VSE (VSEC) Buys Desser Aerospace to Boost Aviation Business
VSE Corporation VSEC has completed its acquisition of Desser Aerospace, a global aftermarket solutions provider specializing in specialty distribution and maintenance, repair, and overhaul (MRO) services. Concurrently, VSE also sold Desser Aerospace's Proprietary Solutions businesses to Loar Group Inc., a diversified aerospace and defense manufacturer and supplier.
Acquisition Terms
The acquisition of Desser Aerospace came at a total cash consideration of $124 million, subject to customary working capital adjustments. Simultaneously, VSE sold Desser Aerospace's Proprietary Solutions businesses to Loar for a cash consideration of $30 million. Consequently, VSE's net cash outlay for the acquired assets amounted to $94 million.
To facilitate the transaction, VSE amended its existing credit facility with its lending syndicate, securing an incremental $90 million Term Loan A and revising certain financial covenants of the existing credit facility. Post closure of the deal, $90 million of the purchase price was funded with the proceeds from Term Loan A, along with a $4 million drawdown from VSE's existing credit facility.
Buyout Synergies
VSE's president and CEO, John Cuomo, welcomed the skilled team from Desser Aerospace to the VSE Aviation business. He emphasized that the acquisition marks a significant milestone for VSE in expanding its exposure to high-growth and higher-margin aviation distribution and MRO markets. By combining Desser Aerospace's distribution and repair capabilities with VSE Aviation's aftermarket business, the company has broadened its product and service portfolio, setting the stage for international expansion into new markets.
The successful acquisition of Desser Aerospace will undoubtedly bolster VSE’s position in the aviation sector. With an expanded product and service portfolio, and a platform for international expansion, VSE is poised to meet the evolving demands of the aviation industry. The strategic move aligns with the company's vision to provide market-leading solutions and technical expertise while enhancing value and performance for its diverse customer base across commercial, business, general aviation and military aftermarket segments.
Share Price Performance
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VSEC shares dropped 2.1% during the trading session on Jul 3, 2023, but gained 25.5% over the past three months, outperforming the Zacks Engineering - R and D Services industry’s 14.2% gain.
The company's primary focus has been on developing strategies to establish a fully dedicated aftermarket business, exclusively catering to high-margin commercial MRO as well as distribution services. These efforts are directed toward fragmented and expanding end markets, with the goal of generating enhanced long-term value for shareholders.
To this end, VSEC announced the sale of its Federal and Defense business segment in the last reported quarter. Also, VSEC successfully finalized the acquisition of Precision Fuel Components, a reputable company specializing in MRO services for engine accessories and fuel systems.
Additionally, the company inaugurated a distribution and e-commerce fulfillment center spanning 450,000 square feet in the expanding Memphis, TN region. This facility will play a crucial role in meeting the escalating demand for aftermarket products among its commercial fleet and e-commerce clientele.
Zacks Rank
A prominent provider of aftermarket distribution and MRO services for transportation assets in both commercial and government sectors, VSE currently carries a Zacks Rank #3 (Hold).
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Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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