Esterline Technologies Corporation (NYSE: ESL) stock surged 29.98% on October 10th, 2018 (as of 11 Oct, 11:09 AM GMT-4; Source: Google finance) after the company entered into a definitive agreement under which TransDigm will purchase all of the outstanding shares of common stock of Esterline for $122.50 per share in cash, which represents a premium of 38% to Esterline’s closing price on October 9, 2018, or a total transaction value of approximately $4.0 billion including the assumption of debt. The stock slightly fell over 0.16% on October 11th, 2018 (As of 11:09 AM GMT-4; Source: Google finance)
The transaction has been approved by the Boards of Directors of both companies. Esterline’s core aerospace and defense business consists of primarily proprietary, sole source products with significant and growing aftermarket exposure. Esterline Technologies has gapped open sharply higher Wednesday morning and is now up 26.26 at $115.05 on above average volume. The stock has surged to a new high for the year. TransDigm expects the acquisition to be financed primarily through cash on hand and the incurrence of new term loans, and currently anticipates the acquisition to be modestly accretive to TransDigm’s adjusted earnings per share within the first year of ownership. Meanwhile, the acquisition will be financed through a combination of existing cash on hand of approximately $2 billion and the incurrence of new term loans. TransDigm has obtained commitments for the full amount of financing required for the transaction. Immediately upon closing, the combined company will maintain the financial flexibility to meet any anticipated operating, acquisition, and other opportunities that may arise though a combination of cash on hand, undrawn revolver, and under certain circumstances, additional availability under its credit agreement.
The transaction is subject to customary closing conditions, including Esterline stockholder approval and the receipt of required regulatory approvals. The companies expect to complete the transaction in the second half of calendar 2019.
The acquisition of Esterline expands TransDigm’s platform of proprietary and sole source content for the aerospace and defense industries, including significant aftermarket exposure. Headquartered in Bellevue, Washington, Esterline is an industry leader in specialized manufacturing for these sectors with anticipated fiscal year 2018 revenue of approximately $2.0 billion. The company consists of 28 business units organized across eight platforms to deliver specialty aerospace, defense and industrial products. The company employs over 12,500 employees in more than 50 operating locations throughout the world.
Esterline has attractive platform positions in both the OEM and aftermarket and has substantial content on many important commercial aircraft variants, many regional and business jet aircraft and major defense platforms.