Shareholders in UK aerospace engineer Meggitt are expected to approve on Wednesday the company's plan to acquire the design and manufacturing (D&M) business of Dunlop Standard Aerospace (DSA) from private-equity house Doughty Hanson.
Existing investors are being offered rights to buy three shares in the expanded company for every seven they currently hold, and at a 40% discount to the market price. They are expected to accept, paving the way for deal completion about a month later.
As part of the deal, the Carlyle Group of the USA will acquire Standard Aero, DSA's Canada-based engine repair and overhaul business.
Meggitt will pay £408 million ($751 million), part-funded by the rights issue, and Carlyle has to find £376 million cash.
For Meggitt, the acquisition is the latest in a long series through which chief executive Terry Twigger has built one of the UK's most respected aerospace players.
The DSA D&M business is a step up from earlier deals, increasing Meggitt's current workforce of 3,700 by 40%, and its revenues of £402 million by 30%.
Integration
But it has an exemplary record of making acquisitions work, having successfully integrated and grown Vibro-Meter of Switzerland and Whittaker Controls of the USA in recent years. Integrating DSA's primarily UK-based activity may in some respects prove simpler.
Certainly it will be both profitable and firmly in line with Meggitt's strategy of shifting emphasis further towards the civil sector.
Meggitt says the strongly performing D&M division draws 80% of revenues from the civil sector and 69% from the aftermarket. Furthermore, 80% of sales were on programmes on which it is the sole supplier.
The result is that the proportion of Meggitt's civil-sourced revenues will grow from around 35% to 45%. With the airline sector just pulling out from the bottom of the cycle, there is the potential for years of growth ahead.
"The D&M division has excellent positions in the global aerospace and defence sectors and with its installed base of products provides a very strong aftermarket business," says Meggitt's Twigger.
The business units being acquired are Coventry, UK-based Dunlop Aerospace Braking Systems and its sister company Dunlop Aerospace Aftermarket Services; Dunlop Aerospace Polymers and Composites, which specialises in military helicopter de-icing; and Dunlop Aerospace Fluid Dynamics, which has a US plant at Troy, Indiana and makes valves and heat exchangers.
The braking business has key collaborations with Honeywell on the Airbus A380 and Lockheed Martin F-35 among numerous other programmes and boasts advanced technologies in brake-by-wire and metal-matrix composites.
Standard Aero, meanwhile, specialises in worldwide support of the Allison commercial engines now owned by Rolls-Royce, including the best-selling Model 250 helicopter turbine, as well as the General Electric CF34, some Hamilton Sundstrand propellers and Pratt & Whitney Canada PT6 and PW100 series engines.
It has almost doubled revenues in the past six years and has 2,600 staff in North America and Europe.
Carlyle managing director Peter Clare says: "Standard Aero represents everything we look for in our investments: industry leading technological capabilities, superior reputation with its customers, and led by an outstanding management team."
Both DSA divisions will retain their current heads under new ownership - D&M managing director David Johnson and Standard Aero chief executive David Shaw.
KIERAN DALY
Source: Flight Daily News
