Goodrich expects to increase its European defence and Airbus business after acquiring TRW's UK-headquartered Aeronautical Systems division for $1.5 billion in cash. It pays the price in increased debt, now up to 65% of the company's market value.
Rating agency Moody's downgraded Goodrich's senior unsecured debt two steps to Baa3, one step above junk status. The agency is confident that Goodrich can reduce its debt, but only if it avoids any more major acquisitions, keeps dividends low, sells other assets and stops share repurchase schemes.
Marshall Larsen, Goodrich president and chief financial officer, projects a joint turnover of slightly under $5 billion this year as the result of the downturn in the civil market, but expects a pick-up in business in 2003-04 fuelled by the defence and regional jet sectors. Combined turnover in 2001 was $5.3 billion.
The merger elevates the company to the position of largest non-engine supplier to Airbus and second largest vendor to Boeing behind Honeywell. In addition, Larsen says TRW's strong Asian and European presence will give Goodrich "new military customers and additional civil airline repair and overhaul business in Europe and Asia. This is a very good fit for us."
Solihull, UK-based Aeronautical Systems will be split into four sectors covering actuators, cargo handling, engine controls and power management, and will be slotted into the company's structure at the end of the year. Consolidation of facilities is expected to produce savings of around $30-40 million and will entail shutting down the current Aeronautical Systems head office with "some job losses", says Larsen.
The acquisition brings with it synergies in engine controls between Goodrich's share of the turboshaft market and Aero-nautical Systems' larger interest in the civil turbofan market.
Goodrich now enjoys a major share of the Airbus A380 programme, including power management, cargo handling, flight controls, landing gear and evacuation systems, which it estimates will be worth $5-7 billion.
Larsen hopes to build on this, moving into cargo handling on other Airbus aircraft and power management systems with Boeing.
Source: Flight International
