Meggitt buys composites division of EDAC for $340m

LONDON (ShareCast) - (ShareCast News) - Engineering group Meggitt (Other OTC: MEGGF - news) has agreed to acquire the composites division of EDAC from Greenbriar Equity Group and other associated sellers for $340m, or £219m in cash. The business produces highly-engineered aerospace components for jet engine and airframe applications, with over 85% of revenues in civil aerospace composites.

Revenues in 2015 are expected to be $104m and the purchase price, adjusted to exclude the $25m present value of the tax asset acquired with the business, implies a multiple of 12.5x 2016 estimated earnings before interest, tax, depreciation and amortisation.

The transaction will be financed by the previously announced debt facilities which are being increased to $600m and is expected to be accretive in year one with a targeted net cost synergy run rate exceeding $6m by the end of year three.

Chief executive Stephen Young said: "This business is a rare, scale player in civil engine and other composite parts. Like the complementary acquisition of the advanced composites businesses of Cobham (Other OTC: CBHMF - news) for which the completion process is well underway, this decisively moves our composites strategy forward, and positions us strongly in this key growth area." As a result of the transaction, which is conditional on regulatory clearance and expected to complete by the end of 2015, and in order to retain flexibility for further bolt-on acquisitions, the company said it has decided to suspend the buyback programme for the remainder of the financial year.