US-based aerospace and defence company Rockwell Collins is to acquire aviation communications specialist Arinc from private equity firm Carlyle for approximately US$1.39bn in cash.
The key driver behind the acquisition for Rockwell was its desire to…
US-based aerospace and defence company Rockwell Collins is to acquire aviation communications specialist Arinc from private equity firm Carlyle for approximately US$1.39bn in cash.
The key driver behind the acquisition for Rockwell was its desire to substantially improve its position in the fast-growing aviation information management space.
The company stated that Arinc operates in the heart of where it believes the industry is going, which is greater connectivity and information enabled solutions between aircraft and ground utilising both satellite and air-to-ground networks.
The move also is part of Rockwell’s plan to reduce its reliance on US government contracts particularly in light of the ongoing sequestration budget cuts. Rockwell said that the acquisition would shift the balance of its business to approximately 54% commercial and 46% government.
The deal is the first under the stewardship of Kelly Ortberg, who took over as Rockwell’s chief executive and president on 1 August.
In an investor call regarding the transaction, Ortberg stated that one of his primary areas of focus since taking over was to accelerate the company’s return to growth through acquisitions.
Ortberg commented: “Over the past few months there have been numerous questions from investors about our appetite for M&A or portfolio shaping actions. This acquisition is a significant step in our plan to position Rockwell Collins for long term sustainable growth. In fact, we expect the addition of Arinc to be accretive to Rockwell Collins’ overall revenue growth rate starting next year.”
Arinc is expected to generate 2013 revenues of just over US$600m.
Rockwell is funding the entire deal through a fully financed debt facility from Citigroup, which was also its financial adviser on the deal. Two thirds of the facility is to be long-term debt, while one-third is new commercial paper.
The financing will increase Rockwell’s leverage to just over 2 times debt to EBITDA, meaning the company will maintain its investment grade rating. Rockwell added that while it intends to maintain its dividend rate, it plans to use cash on hand to the medium term to pay down the commercial paper rather than focus on share repurchases.
