Rockwell Collins to acquire B/E Aerospace for USD8.3bn in cash, stock and debt

Rockwell Collins and B/E Aerospace entered (23-Oct-2016) a definitive agreement under which Rockwell Collins will acquire B/E Aerospace for approximately USD6.4 billion in cash and stock, plus the assumption of USD1.9 billion in net debt. Details include:

• Terms and consideration: Each B/E Aerospace shareowner will receive total consideration of USD62 per share, comprised of USD34.10 per share in cash and USD27.90 in shares of Rockwell Collins common stock, subject to a 7.5% collar. This represents a premium of 22.5% to the closing price of B/E Aerospace common stock on 21-Oct-2016;
• Ownership: Upon completion of the transaction, which is expected in Northern spring 2017, current B/E Aerospace shareowners will own approximately 20% of the combined company;
• Rationale: The transaction is expected to generate run-rate pre-tax cost synergies of approximately USD160 million (USD125 million after tax). In addition, Rockwell Collins expects to make certain conforming purchase accounting adjustments resulting in improved pre-tax earnings of approximately USD60 to USD90 million p/a for the first six years after the acquisition. Transaction is expected to be double-digit accretive to earnings per share in the first full fiscal year. Combined firm expected to generate five-year free cash flow in excess of USD6 billion;
• Financing: Rockwell Collins expects to finance the cash portion of the transaction with debt financing, a significant portion of which has been committed. Upon completion of the transaction, Rockwell Collins is expected to maintain a strong investment grade credit rating with net debt of approximately USD7.5 billion, and plans to maintain its current dividend policy. Rockwell Collins intends to pay down USD1.5 billion of the new debt by the end of its fiscal 2019 while curtailing its share repurchase program to a level sufficient to offset dilution;
• Approvals: Transaction has been unanimously approved by the boards of directors of both companies. Transaction remains subject to the approval of Rockwell Collins and B/E Aerospace shareowners, regulatory approvals and other customary conditions;
• Governance: Upon closing, Rockwell Collins will increase the size of its board to 11 members with the addition of two B/E Aerospace board members;
• New business segment: Werner Lieberherr, CEO of B/E Aerospace, will become EVP and COO of a newly created aircraft interior systems segment for Rockwell Collins;
• Scale: The acquisition significantly increases Rockwell Collins' scale and diversifies its product portfolio, customer mix and geographic presence. On a pro forma basis, Rockwell Collins would have nearly 30,000 employees, USD8.1 billion in revenues and EBITDA of USD1.9 billion (year ending 30-Sep-2016). [more - original PR]