Graham Warwick/WASHINGTON DC
Boeing's acquisition of Jeppesen Sanderson for $1.5 billion in cash lays the foundation for an information services business that will generate substantially more than a $1 billion a year in revenues, says chairman Phil Condit.
He defends the price paid for the leading flight information services company, saying the multiple on Jeppesen's sales of $235 million is in line with other recent transactions in the publishing industry. Profit margins are over 25%.
Denver-based Jeppesen was auctioned by media group Tribune, which acquired the company when it bought the Times Mirror publishing group. Boeing's deal follows its acquisition earlier this month of technical information specialist Continental Graphics and last year's purchase of the Preston Group, a leader in air traffic management planning.
Condit says Boeing has all the elements in place to create an aviation services business able to provide "total solutions" to customers. "This is the glue for providing a set of information services that will dramatically enhance the value of Boeing," he says.
Combining Jeppesen's capability with Continental Graphics, Preston and Boeing's internal capabilities is expected to generate substantial new business. Condit believes there is an opportunity for around $400 million in revenues in the airport and airspace management area, more than $100 million in customer support and $500 million in information services.
Condit says the Jeppesen acquisition and the move into aviation services is part of Boeing's growth strategy. "In our core businesses, we expect to see 5% top-line growth. If we want 15% on the bottom line, we have got to do things on the growth side."
Boeing expects Jeppesen to continue to grow at the current rate of about 10% a year. The company is leading moves to the electronic delivery of flight information and Boeing is expected to accelerate the transition to the web.
Jeppesen has an 80% share of the worldwide navigation chart and data services market, which accounts for 75% of its business, with the biggest potential growth area being Europe, says Jeppesen chief executive Horst Bergmann.
Boeing plans to operate Jeppesen as a stand-alone entity, retaining the management. It will report to the Commercial Aviation Services division, but Condit predicts Boeing will eventually form an "overarching" information services business structure.
Source: Flight International
