Chris Jasper/LONDON
Smiths Industries says limited opportunities for mergers in the avionics sector mean the growth of its aerospace business is likely to be achieved by expanding its burgeoning control systems interests through more bolt-on acquisitions funded by a £750 million ($1.2 billion) war chest.
The UK company says it is looking for a "mega-deal" - but adds that, with the avionics sector consolidated around Sextant, Rockwell Collins and Honeywell, growth is more likely to come from a steady stream of modest purchases in the less-focused non-cockpit-based systems sector.
Even without more purchases, sales in Smiths' aerospace division - already slightly ahead of its medical and industrial operations - are set to double by 2009 as building rates accelerate in defence programmes such as the Eurofighter and Boeing F/A-18 E/F.
Smiths' aerospace strategy envisages growth centred on its integrated utilities management capability, which offers centralised computer control of equipment not used for flying the aircraft.
The recent acquisitions of the aerospace activities of Invensys and BAE Actuation Systems, together costing $278 million and both US-based, added mass to a control systems competency established with the takeover of power supplies specialist Leland years ago and augmented by expansion into fuel management systems.
Cockpit avionics are still core to Smiths' aerospace activities, but purchases in the sector have been modest. While control systems account for only 22% of aircraft-related aerospace sales, that figure is expected to rise as more purchases are targeted.
Smiths also wants to expand its environmental monitoring business, centred on battlefield chemical agent detection specialist Graseby Dynamics of the UK, acquired for £100 million in 1998, and civil counterpart ETG of the USA, bought last year.
Smiths aerospace group produced sales of £242 million in the six months to 31 January, with defence accounting for 60%, civil 20% (after a slowdown in deliveries) and spares 20%.
Source: Flight International
