Triumph Group, Inc.
) has struck an agreement with General Donlee Canada Inc.
(GDI.TO), as per which the former will acquire the latter for
$110 million in cash. This amount will be utilized to acquire
General Donlee's outstanding equity and retirement of its
General Donlee is a leading manufacturer of flight critical
complex machined components. The company's primary product lines
include engine shafts, thrust links, rotorcraft masts and landing
gear applications. The acquisition will improve the product
capabilities of Triumph Group. Besides enhancing the relationship
with the existing customers, the acquisition will further
diversify the customer base.
Post acquisition, the acquired firm will be a part of Triumph
Group's Aerospace Systems Group. Subject to customary closing
conditions, the transaction is expected to be completed in the
third quarter of fiscal year 2014. The company expects the
transaction to add $60 million annually to the top line and be
accretive to earnings immediately.
Currently, Triumph Group seems to be busy acquiring and adding
value to its portfolio. Recently, the company completed the
acquisition of the pump and engine control systems business of
Goodrich Corporation from
United Technologies Corp.
). Prior to that, it took over Primus Composites from
Precision Castparts Corp.
) for an undisclosed amount.
Triumph Group's organic growth has also been reasonably strong
based on the addition of products and services, expansion of
operating capacity and marketing of a complete product portfolio.
Last month, the company posted encouraging fiscal first quarter
2014, which surpassed the Zacks Consensus Estimate on the back of
solid execution and lower costs. Specifically, Aerospace Systems
revenue grew 56.2% year over year to $219.5 million.
However, we remain concerned about the uncertainty related to
defense budgets as the demand for Triumph Group's military and
defense products is largely tied to government defense spending.
The company presently retains a short-term Zacks Rank #3 (Hold).
In the near term, we would advise investors to accumulate its
short-term Zacks Rank #1 (Strong Buy) peer
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