Stanley Black & Decker to Buy Boeing Supplier; Deal Has a MAX Contingency -- update

By Robert Barba

Stanley Black & Decker Inc. agreed to buy Consolidated Aerospace Manufacturing LLC for as much as $1.5 billion, with at least part of the consideration contingent upon the Boeing 737 MAX returning to service.

Stanley said $200 million of the purchase price for the specialty-fasteners manufacturer will be held back and is contingent on the Federal Aviation Administration allowing the MAX to return to service and Boeing Co. achieving certain production levels.

Regulators around the world grounded the MAX last year following two crashes of the plane that resulted in the death of 346 people.

Bankers said the MAX crisis had stalled the frenetic pace of deal making among companies supplying Boeing and Airbus SE, which have a combined backlog of around 13,000 jetliners. With MAX production halted, valuation has become tougher, and many firms are pivoting toward more work for Airbus and military products to dilute their exposure to Boeing.

However, continuing industry consolidation also helps Boeing by creating stronger suppliers better able to withstand the halt in MAX output, said Chris Higgins, a principal at consultant Avascent who advises on aerospace M&A.

The effects of the grounding have rippled through several suppliers. Spirit AeroSystems Holdings Inc., one of the biggest suppliers for the MAX, said earlier this month it was planning to lay off 2,800 staffers given the uncertainty of MAX production.

Arconic Inc. said earlier this week it expected to lose $400 million in sales and could cut jobs this year as a result of the halted production.

Consolidated Aerospace, which also makes components for the defense markets, had roughly $375 million in revenue in the last year. Stanley on Wednesday reported 2019 revenue of $14.44 billion, with earnings of $3.99 a share.

Stanley said the deal could add between 30 cents and 40 cents a share of earnings by its third year.

(END) Dow Jones Newswires

January 29, 2020 07:33 ET (12:33 GMT)

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