Friday, April 27, 2018

Boeing Nears Deal to Buy Aerospace-Parts Specialist KLX: Such a move would be part of an expansion into the aircraft-services business

The Wall Street Journal
By Dana Mattioli, Dana Cimilluca and Doug Cameron
April 27, 2018 1:27 p.m. ET

Boeing Co. is nearing a deal to buy aerospace-parts specialist KLX Inc. as part of its expansion into the aircraft-services business, according to people familiar with the matter.

The companies are expected to announce a deal Monday, the people said, though it is possible the plan could be derailed. In December, KLX announced it had initiated a sales process in response to expressions of interest, and Boeing has had competition in its pursuit of the company from at least one private-equity firm.

The terms and structure of a KLX deal with Boeing couldn’t be learned. As of Friday morning, KLX had a market value of about $3.7 billion after a strong run since the December announcement. Boeing has a market value of around $200 billion following a recent surge in its shares.

The proposed KLX deal would be the largest acquisition so far in Boeing Chief Executive Dennis Muilenburg’s ambitious plan to triple sales from services to as much as $50 billion within a decade. He said this week that the Boeing Global Services unit was looking for deals.

Boeing has a market share of just 7% in the fragmented aircraft-services market it said is worth $2.6 trillion over the next 10 years. Providing services such as maintenance, parts and training typically generates higher margins than making aircraft or weapons systems.

Wellington, Fla.-based KLX sells fasteners, bearings and other parts for commercial, military and business jets and provides logistics services. It also has an energy business, providing oil-field services and rental equipment.

KLX forecasts sales of $2 billion this year, compared with $1.75 billion in 2017. Margins of around 17% are in line with those of Boeing’s services unit. It is unclear whether Boeing would keep the company’s energy-services business. The unit had sales of $321 million last year.

KLX was spun off aircraft-seat maker B/E Aerospace Inc. in 2014. Last year, B/E Aerospace was acquired by Rockwell Collins Inc. in a deal that kicked off a furious round of consolidation in the sector. Rockwell Collins is now being acquired by United Technologies Corp.

Boeing also remains in talks with Brazilian plane maker Embraer SA over establishing a joint venture focused on commercial jetliners. Boeing is expected to take a majority stake in the venture, according to people familiar with the matter.

Any deal would carve out Embraer’s defense operation and probably its business jet unit, the Brazilian company said Friday.

Original article can be found here ➤

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