Evans & Sutherland (E&S) is selling its simulator visual-system business to Rockwell Collins because it believes worldwide aerospace and defence markets are consolidating, favouring larger companies.
“With fewer contracts available for competition, the revenue volatility is difficult for a small publicly-traded company to manage,” E&S president and chief executive Jim Oyler told analysts yesterday.
Market consolidation favours companies with extensive portfolios and integration capability, he said, pointing out that Rockwell Collins has “extensive worldwide operations and an established simulation business”.
The sale of E&S’s image generator and visual display business for $71.5 million in cash will reshape an already highly competitive simulation industry. It will enable Rockwell Collins to compete head on with market leader CAE in the commercial and military markets for both simulators and visual systems, often acquired as a package.
The deal could also have implications for Thales Training & Simulation, which, lacking its own US Federal Aviation Administration Level D-certificated product offering, has often packaged E&S visuals with its commercial flight simulators.
Meanwhile, Rockwell Collins’s position in the commercial market will be boosted by buying E&S’s visuals business. Breaking into the airline market has been the company’s ambition since it acquired simulator manufacturer NLX for $125 million in December 2003.
NLX, since renamed Rockwell Collins Simulation & Training Solutions, has a healthy military business, and has produced business-aircraft simulators, but has yet to break into the airline market dominated by CAE and Thales.
Oyler told analysts the purchase price agreed for E&S’s simulation assets is more than the pre-sale valuation on the entire company. Salt Lake City, Utah-based E&S, which will now focus on digital theatres and laser projectors, plans to use the proceeds to pay off debt, fund pensions and provide working capital.
Under the deal, E&S will grant Rockwell Collins an exclusive licence to use its high-resolution laser projectors in simulation applications. Several visual systems with the LaserWide projectors have already been sold to airlines, for delivery beginning next year.
GRAHAM WARWICK / WASHINGTON, DC
Source: Flight International
