Total Consideration Of The Transaction Estimated At $8.3 Billion

Rockwell Collins and B/E Aerospace have announced that they have entered into a definitive agreement under which Rockwell Collins will acquire B/E Aerospace for approximately $6.4 billion in cash and stock, plus the assumption of $1.9 billion in net debt.

Under the terms of the agreement, each B/E Aerospace shareowner will receive total consideration of $62.00 per share, comprised of $34.10 per share in cash and $27.90 in shares of Rockwell Collins common stock, subject to a 7.5% collar.  This represents a premium of 22.5% to the closing price of B/E Aerospace common stock on Friday, October 21, 2016.

The transaction combines Rockwell Collins’ capabilities in flight deck avionics, cabin electronics, mission communications, simulation and training, and information management systems with B/E Aerospace's range of cabin interior products, which include seating, food and beverage preparation and storage equipment, lighting and oxygen systems, and modular galley and lavatory systems for commercial airliners and business jets.

The acquisition significantly increases Rockwell Collins’ scale and diversifies its product portfolio, customer mix and geographic presence.  On a pro forma basis, Rockwell Collins would have nearly 30,000 employees, $8.1 billion in revenues and $1.9 billion in EBITDA for the twelve months ending September 30, 2016.

“This transformational acquisition is consistent with our strategy to accelerate growth and build value through market-leading positions in cockpit and cabin solutions,” said Kelly Ortberg, Chairman, President and Chief Executive Officer of Rockwell Collins (pictured). “We see tremendous opportunity to better serve our commercial aviation, business jet and military customers through broader offerings.”

Ortberg continued, “B/E Aerospace has a leading position in nearly all the segments it serves and a highly visible, long-cycle backlog," Ortberg said. "Beyond new aircraft deliveries, its $12 billion installed base provides a strong flow of aftermarket retrofit opportunities that balances our current cyclical exposure to OEM production rates.  Additionally, our combined portfolio uniquely positions us to integrate cabin products, smart network technologies and connectivity solutions to significantly enhance aircraft uptime and airline profitability while improving the experience of passengers and airline personnel.”

“We expect to generate significant run-rate cost synergies and over $6 billion in free cash flow over the next five years with expected free cash flow conversion of greater than 100 percent.  In addition, by leveraging our respective airline and OEM relationships, as well as Rockwell Collins’ business jet dealer network and military aircraft positions, we firmly believe there are revenue synergies that create meaningful upside to our business case,” he said.

“Our combination with Rockwell Collins represents an excellent outcome for B/E Aerospace’s stockholders, who will receive an immediate premium as well as a substantial equity interest in a strong combined company with a broader range of products, customers, and the combined expertise and resources to create future value," said B/E Aerospace Founder and Chairman, Amin Khoury. "We feel confident that this combination delivers significant long-term benefits neither company could realize on its own.  We look forward to becoming part of Rockwell Collins and leveraging their technology to accelerate our long-term growth as we embark on the next chapter in the company’s history.

“I’m excited to welcome B/E Aerospace’s talented employees and bring together two industry leaders with complementary capabilities and strong reputations for innovation, quality and delivering sustained customer value,” he said.

The transaction is expected to generate run-rate pre-tax cost synergies of approximately $160 million ($125 million after tax).  In addition, Rockwell Collins expects to make certain conforming purchase accounting adjustments resulting in improved pre-tax earnings of approximately $60 to $90 million per year for the first six years after the acquisition.  The transaction is expected to be double-digit accretive to earnings per share in the first full fiscal year.

(Image provided with Rockwell Collins news release)

FMI: www.rockwellcollins.com, www.beaerospace.com