After a month of speculation related to the sale of
B/E Aerospace Inc.
), the company finally announced that it will split its business to
form two independent public traded companies. B/E Aerospace will
break up the business into logistics, distribution and technical
operation and aircraft seating and other cabin manufacturing
The separation will likely be completed by the beginning of 2015,
subject to customary closing conditions. The manufacturing business
("Manufacturing Co.") includes design, production, and direct sales
of aircraft components. Distribution business ("Services Co.") will
solely cater to the aerospace and energy service markets.
With the formation of two standalone companies, B/E Aerospace also
escaped from the purview of taxation. On an adjusted basis,
Services Co. had revenues of nearly $1.6 billion for the
trailing-twelve months ending Mar 31, 2014. Manufacturing Co., on
the other hand, has revenues of approximately $2.5 billion for the
trailing twelve months ending Mar 31, 2014.
The strategic split reflects the company's efforts to optimize the
individual needs of two businesses and prioritize accordingly to
offer increased value to its shareholders. The disintegration would
further lead to cost synergies and increased operational
flexibility for both the business arms. In addition, management
will be able to focus increasingly on efficient capital allocation,
free cash flow distribution policy and growth-augmenting
Going ahead, the spin-off prompted the company to revise its
full-year earnings guidance to $4.35 per share from the prior $4.30
per share. The addition of EMTEQ, Inc. and F+E Fischer +
Entwicklungen GmbH & Co. KG to the company's manufacturing wing
will further act as a tailwind.
B/E Aerospace currently holds a Zacks Rank #3 (Hold). Other
better-ranked aerospace and defense service providers include
Spirit AeroSystems Holdings, Inc.
). All the above stocks currently carry a Zacks Rank #2 (Buy).
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