GRAHAM WARWICK / WASHINGTON DC
Goodrich is to acquire TRW's Aeronautical Systems business, formerly Lucas Aerospace, for $1.5 billion in cash, boosting its transformation into a top-tier aerospace supplier. TRW will use the sale proceeds to accelerate debt reduction and the spin-off of its automotive business as it manoeuvres to escape a takeover bid by Northrop Grumman.
Goodrich describes Aeronautics Systems as a "strategic fit", broadening and strengthening its current businesses, expanding its international presence and increasing its aftermarket activity. The TRW unit had sales of $1.1 billion last year and operating earnings of $180 million. Goodrich's aerospace business had revenues of $4.2 billion and $644 million in operating income. Sales will be down this year, but the acquisition should boost the company to second place in the aerospace equipment supplier league table, behind Honeywell but ahead of United Technologies' Hamilton Sundstrand.
Goodrich estimates it can achieve cost savings through synergies of $30-40 million annually by the third year, with the acquisition expected to close in the fourth quarter. The fuel controls businesses would be combined in the way landing gear units were consolidated following the 1999 merger with Coltec Industries.
TRW acquired Lucas Aerospace as part of its 1996 takeover of UK/US automotive firm LucasVarity. The merger left the US firm overburdened with debt and under performing financially. TRW is continuing talks with potential buyers of its $5 billion Space & Electronics business, including BAE Systems and Northrop Grumman, which always planned to sell off the Aeronautical Systems unit if its takeover bid succeeds.
The TRW business produces flight and engine controls, power generation and cargo systems, and actuators, winches and other equipment. Sales are split 75:25 between civil and military and 55:45 between original equipment manufacturers and aftermarket.
Source: Flight International
