Precision Capstaprts Inc.
) entered into an agreement to acquire Aerospace Dynamic
International (ADI) from the Marvin Group in an all-cash deal.
The acquisition is valued at $625 million and is expected to
close by the first quarter of 2015, subject to regulatory
Aerospace Dynamics International is known as the leading
supplier of large complex machined parts and assemblies to
Aerospace and Defense industries. ADI has the most advanced
titanium machining capabilities and is a trusted supplier of
major structural components on practically every commercial and
military aircraft program for global OEMs along with tier one
Precision Castparts will include the ADI business in its
Airframe Products segment as the latter's business is expected to
improve the value proposition for the airframe business by
expanding its aerostructures product offering and its role on the
next-generation aircraft. The Permaswage and Airdome acquisitions
had earlier strengthened Precision's permanent fittings and
separable fittings business. This latest acquisition will cause
further upward momentum. The ADI acquisition is expected to be
accretive to earnings immediately.
Apart from vertical integration, the acquisition of Permaswage
also provide Precision with geographic and product synergies. ADI
acquisition also supports Precision Castparts growing presence in
Southern California, as it has a facility in Valencia, CA. ADI's
core competence lies in large complex components, hard metal
machining and critical assemblies. It has strong positions across
high-growth commercial platforms, including a significant
presence on the Airbus A350.
Therefore, Precision is very optimistic about its acquisition
of ADI, which it has been considering for a while, as it already
enjoys a favorable position in the current and next-generation
commercial aircraft platforms. Moreover, this acquisition comes
at an opportune time when aerospace and aircraft manufacturers
worldwide are witnessing an increase in orders due to growing
Leading aerospace companies such as Precision Castparts and
TransDigm Group (TDG) have been pursuing strategic acquisitions
to attain synergies and cost efficiencies. Acquisitions pursued
by both these companies in the recent past have been accretive to
Precision Casptarts currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the aerospace sector include
Alliant Techsystems Inc
Teledyne Technologies Inc
Norsk Hydro ASA
), all three having a Zacks Rank #2 (Buy).
ALLIANT TECHSYS (ATK): Free Stock Analysis
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PRECISION CASTP (PCP): Free Stock Analysis
TELEDYNE TECH (TDY): Free Stock Analysis
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