B/E Aerospace to Acquire Honeywell's Aerospace Distribution Business for $1.05 Billion; Transaction Significantly Accretive; Rai
June 09 2008 - 5:44AM
Business Wire
B/E Aerospace, Inc. (NASDAQ:BEAV), today announced that it has
signed a definitive agreement with Honeywell International Inc. to
acquire the assets of Honeywell�s Consumables Solutions
distribution business (HCS). As part of the transaction B/E
Aerospace will enter into a 30-year contract to become Honeywell�s
exclusive licensee with respect to the sale to the global aerospace
industry of Honeywell proprietary fasteners, seals, gaskets and
electrical components associated with such products as Honeywell�s
Engines, APU�s, avionics, and wheels and brakes. B/E Aerospace will
also become the exclusive supplier of such consumable products, as
well as standard fasteners and consumables to support Honeywell�s
internal manufacturing needs. �The combination of HCS and B/E
Aerospace will create a leading global distributor and value added
supply chain manager of aerospace hardware and other consumable
products from locations in all key geographic markets worldwide.
The combined Company will serve as a distributor for every major
aerospace fastener manufacturer in the world. In addition, the
significant product line expansion and operating synergies created
by the combination will enhance our ability to serve our customers
and create significant value for our shareholders,� said Amin J.
Khoury, Chairman and Chief Executive Officer of B/E Aerospace.
Revenues and pro forma EBITDA, exclusive of synergies, for the
latest twelve months ended March 31, 2008 (LTM) for the HCS
business, including the license and supply agreements, were
approximately $553 million and $83 million, respectively.
Tax-deductible goodwill arising on completion of the transaction
will provide B/E Aerospace with an estimated net present value of
approximately $143 million resulting in an effective price of $907
million or approximately 10.9x LTM EBITDA, excluding synergies, and
approximately 5.4x LTM EBITDA, including synergies. The transaction
is expected to yield synergies of at least $84 million per year by
2011, thereby creating substantial additional shareholder value.
The annual synergies that are expected to be realized over the
three-year period 2009 to 2011 are as follows: approximately $10
million to $30 million or approximately $0.05 to $0.20 per share in
2009, approximately $30 million to $60 million or approximately
$0.20 to $0.40 per share in 2010 and at least $84 million or
approximately $0.55 per share in 2011. The purchase consideration
of $1.05 billion consists of at least $800 million in cash plus an
additional amount of $250 million which will be paid in B/E
Aerospace common stock or cash, at the Company�s election, although
in no event will less than 6 million shares be issued if the value
of the stock component is less than $250 million. The share
component of the $250 million portion of the purchase price will be
valued depending upon the value of the shares, determined as the
volume-weighted average share price based on the 10 consecutive
trading days ending on, and including, the date that is two trading
days prior to the closing date. Honeywell and B/E Aerospace have
entered into a stockholders agreement which includes a holding
period for two years with respect to 50 percent of its B/E
Aerospace shares and for one year with respect to all of its B/E
Aerospace shares and which includes a stand-still provision. B/E
Aerospace will fund the cash consideration and simultaneously
refinance its $150 million of funded debt under its existing credit
facilities with a new $1.35 billion fully-committed Senior Credit
Facility from JPMorgan, Credit Suisse and UBS Investment Bank
including an undrawn $350 million Revolving Credit Facility and a
$1.0 billion Term Loan B. Consummation of the transaction is
subject to customary regulatory approvals. Pro forma total
debt-to-total capitalization, as of the twelve months ended March
31, 2008, will be approximately 40 percent. B/E Aerospace expects
to fund the transaction with the new Senior Credit Facility but is
also considering other forms of debt financing. Approximately $84
million of synergies is expected to arise over the next three years
as the result of: Consolidation of multiple sales offices, forward
stocking locations and operational facilities; Leveraging of B/E
Aerospace�s robust IT and automated inventory retrieval systems to
support the entire integrated business; Transition of the HCS
�broker� business model to the B/E Aerospace distribution business
model. �Much hard work and significant investment will be required
to complete the integration, which is expected to be implemented in
phases over a three year period. Both B/E Aerospace and HCS have
excellent managerial, sales, procurement, IT and logistics
personnel. We will be retaining the best personnel from both
organizations, and we welcome the many HCS personnel who will be
joining B/E Aerospace. We have a rigorous integration planning
process underway and expect to assemble a fully staffed integration
team consisting of key members of both organizations within 15
days,� commented Mr. Khoury. The inventory investment required to
convert the HCS business to the B/E Aerospace business model is
expected to be approximately $200 million over a three-year period.
Integration and cash consolidation costs are expected to be
approximately $15 to $20 million. As a result of the expected
accretive nature of this transaction, B/E Aerospace announced that
it is raising its earnings guidance for 2009 and 2010. The Company
is increasing its 2009 earnings per share guidance by $0.05 per
diluted share to approximately $2.85 per diluted share and its 2010
earnings per share guidance by $0.15 per diluted share to
approximately $3.65 per diluted share. The transaction is expected
to be slightly dilutive to full year 2008 earnings per share as a
result of acquisition related effects. In 2009, the first full
fiscal year after expected completion of the transaction, the B/E
Aerospace distribution business segment is expected to be our
largest and most profitable segment and is expected to generate
revenues of approximately $1.2 billion representing approximately
43 percent of B/E Aerospace�s expected 2009 revenues of
approximately $2.8 billion. Mr. Khoury continued, �Growth in our
aerospace consumables distribution segment is expected to exceed
industry growth as we continue to expand our product line and our
customer base and as we continue to gain share. �Overall, our
expectation for B/E Aerospace to continue to deliver superior
earnings performance over the next three years remains intact. This
is consistent with the long term visibility arising from our high
in quality growing backlog in addition to expected follow on
orders.� Credit Suisse Securities (USA) and UBS Investment Bank
acted as financial advisors to B/E Aerospace, and provided fairness
opinions to the Board of Directors of B/E Aerospace on the
financial terms of the transaction. Shearman & Sterling LLP
provided legal advice to B/E Aerospace. B/E Aerospace will host a
conference call today, Monday, June 9, 2008, at 11:00�a.m. (Eastern
Time) to discuss the acquisition of HCS. Investors can call
1-888-663-2240 (domestic) or 913-312-1452 (international), with the
access code 3347851, or listen via live audio webcast. To listen
live and view the presentation, visit the Investors section of the
B/E Aerospace, Inc. website www.beaerospace.com and follow the link
to "Webcasts". A replay of the call will be available beginning at
1:00�p.m. (Eastern Time) on June 9, 2008, through 1:00�p.m. June
14, 2008 (Eastern Time), at 1-888-203-1112 (domestic) or
1-719-457-0820 (international), with the access code 3347851. The
replay will also be available at www.beaerospace.com. This news
release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements
include, but are not limited to, the completion of, and benefits
from, the acquisition, B/E Aerospace�s financial guidance and
industry expectations for the next several years. Such
forward-looking statements involve risks and uncertainties. B/E
Aerospace�s actual experience and results may differ materially
from the experience and results anticipated in such statements.
Factors that might cause such a difference include changes in
market and industry conditions and those discussed in B/E
Aerospace�s filings with the Securities and Exchange Commission,
which include its Proxy Statement, Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. For
more information, see the section entitled �Forward-Looking
Statements� contained in B/E Aerospace�s Annual Report on Form 10-K
and in other filings. The forward-looking statements included in
this news release are made only as of the date of this news release
and, except as required by federal securities laws, we do not
intend to publicly update or revise any forward-looking statements
to reflect subsequent events or circumstances. About B/E Aerospace,
Inc. B/E Aerospace, Inc. is the world�s leading manufacturer of
aircraft cabin interior products, and the leading aftermarket
distributor of aerospace fasteners. B/E Aerospace designs, develops
and manufactures a broad range of products for both commercial
aircraft and business jets. B/E Aerospace manufactured products
include aircraft cabin seating, lighting, oxygen, and food and
beverage preparation and storage equipment. The Company also
provides cabin interior design, reconfiguration and
passenger-to-freighter conversion services. Products for the
existing aircraft fleet - the aftermarket - generate about 60
percent of sales. B/E Aerospace sells and supports its products
through its own global direct sales and product support
organization. For more information, visit the B/E Aerospace, Inc.
website at www.beaerospace.com.
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