Precision Castparts Outbid in $1.27b McKechnie Aerospace Deal

9/27/2010 12:01:00 AM
NEWS BRIEFS
Precision Castparts Outbid in $1.27b McKechnie Aerospace Deal

Precision Castparts Corp. was reportedly outbid for rival fastener manufacturer McKechnie Aerospace.

The winning bid was made by aerospace components maker TransDigm Group, which agreed to pay $1.27 billion for McKechnie. The deal is expected to close by the end of the year.

“This is the first sizable acquisition opportunity that we have seen in the last 3 or 4 years that meets our stringent strategic, operational and value-creation criteria,” stated TransDigm CEO W. Nicholas Howley. “They have continually invested in new platforms and are well positioned for growth as the commercial aerospace markets continue to recover from the recent down cycle and the new platforms begin to ramp up.”

Interest in McKechnie, which makes fasteners, latches and valves, comes as Boeing and Airbus boost 2011 output to record levels.

“There’s substantial pent-up demand for continued consolidation among commercial-aviation partsmakers,” said William Alderman of Alderman & Co. Capital LLC. “The trend and the need for this rationalization did not change during the recession; it was simply delayed.”

McKechnie revenue is expected to top $300 million in 2010, with EBITDA margins ranging from 30% to 35% of revenues. The business, which employs about 1,500 workers, consists of seven major operating units that primarily sell to the worldwide commercial aerospace markets.

Approximately two-thirds of the revenues are sold to the commercial transport OEM and aftermarkets; about 15% to the business and regional jet OEM and aftermarkets, and about 15% to the defense segment. Aftermarket revenues account for roughly 40% of the total with the balance sold primarily to the worldwide aerospace OEM markets. Less than 15% of the revenues are to the military markets.

McKechnie has major platform positions in both the OEM and aftermarket on a range of currently produced Boeing and Airbus aircraft as well as a many regional and business turbine aircraft. The company also has significant content on the new Boeing 787, Airbus A380 and A350.

Former SPS Technologies executive Jim Costello is president of McKechnie’s Fasteners Group, which is comprised of Valley Todeco in Sylmar, CA, and the Linread businesses in the UK. The Fasteners Group generates about 20% of overall McKechnie revenues.

In addition, McKechnie produces proprietary connecting rods and supplies certain mechanical controls to both Boeing and Airbus.

McKechnie’s two largest operating units — Los Angeles-based Hartwell and Electromech/Welco in Wichita, KS — comprise about 60% of company revenue and a “significantly higher percentage of the total company profits.” Hartwell designs and manufactures proprietary external aerospace latches and connecting devices. Electromech/Welco is a major supplier of proprietary aerospace motors, blowers, valves and actuators.

Irvine, CA-based McKechnie is owned by private-equity firm JLL Partners Inc. and Morgan Stanley. The partners bought McKechnie in 2007 for $850 million from London-based Melrose Plc. Before that, it was owned by private equity firm Cinven Ltd. Web: mckechnieaerospace.com

Headquartered in Cleveland, OH, TransDigm designs, produces and supplies aircraft components for use on nearly all commercial and military aircraft in service today. The company generated fiscal 2009 revenue of $762 million and net income of $163 million. Web: transdigm.com ©2010 GlobalFastenerNews.com

Precision Castparts Outbid in $1.27b McKechnie Aerospace Deal

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