Jason Sandefur

B/E Aerospace Inc. agreed to buy Honeywell’s aerospace fastener distribution business, Honeywell Consumable Solutions, for $1.05 billion, transforming B/E Aerospace into one of the largest distributors of aerospace fasteners in the world.

“The combination of HCS and B/E Aerospace will create a leading global distributor and value added supply chain manager of aerospace hardware and other consumable products from locations in all key geographic markets worldwide,” stated B/E Aerospace CEO Amin Khoury. “The combined company will serve as a distributor for every major aerospace fastener manufacturer in the world.”

As part of the deal, which is expected to close in the third quarter, B/E will enter into a 30-year contract to become Honeywell’s exclusive licensee to sell fasteners, seals and other products to the global aerospace industry.

With a combination of $800 million in cash and the remaining $250 million in common stock, B/E paid about twice HCS’ $524 million in revenue last year reportedly about double the aerospace and defense sector’s price-to-sales ratio of 1.1 to 1.

By 2009, B/E’s distribution business segment “is expected to be our largest and most profitable segment and is expected to generate revenues of approximately $1.2 billion,” or about 43% of overall revenue at the company.

Integrating the two units is expected to take three years. The inventory investment required to convert the HCS business to B/E’s business model is expected to reach approximately $200 million.

Honeywell acknowledged that HCS was a growing business, but said it no longer fit the company’s focus on more advanced technologies.

Market analysts seemed excited about the deal. “The deal lines up the two largest players in the aerospace fastener distribution market and solidifies B/E’s dominant position,” noted research analysts at Oppenheimer.

In 2007 B/E Aerospace reported its distribution segment, including fasteners, generated a 53.7% jump in sales to $386.5 million, reflecting a higher level of revenues from first and second tier aerospace manufacturers and from higher military sales. Operating income soared 69% to $85.5 million.

Overall revenue during 2007 jumped 48.7% to a record $1.68 billion, while net income rose 72% to $147.3 million.

B/E Aerospace acquired New York Fasteners Corp. (NYF) for $66.9 million in cash during 2007 and merged NYF’s hardware distribution and vendor-managed inventory business with its own distribution operations in Miami.

B/E Distribution operates a 355,760 sq ft distribution facility in Miami and an additional 67,000 sq ft facility in Stratford, CT; a 36,000 sq ft facility in Paramus, NJ; and a 49,000 sq ft facility in Wichita, KS. Web: beaerospace.com �2008 FastenerNews.com