Wednesday, April 16th3.3°C
21417
20654

Heroux-Devtek makes first European acquisition with $128 million deal in U.K.

MONTREAL - Canadian aerospace manufacturer Heroux-Devtek has made its first major acquisition since selling its aerostructure business 17 months ago, purchasing a British landing-gear company for $128 million.

The Montreal-area company said the purchase of APPH from BBA Aviation PLC will expand its manufacturing reach in Europe, diversify its customer base and give it a greater presence in the lucrative repair and replacement part business.

"The acquisition of APPH brings significant and immediate strategic benefits to Heroux-Devtek, while strengthening its global competitive position and status as a leading landing gear system provider for aircraft weighing less than 100,000 pounds," Heroux-Devtek CEO Gilles Labbe said in a conference call from Britain on Monday.

Based in Longueuil, Que., Heroux-Devtek is acquiring four plants in the United Kingdom and one in Wichita, Kan., a key centre for business jets in North America. The APPH plants have a combined workforce of about 400 employees.

Heroux-Devtek's (TSX:HRX) shares hit a 52-week high of $11.74 in early trading Monday and were up 88 cents or 8.2 per cent at $11.60 in the afternoon on the Toronto Stock Exchange.

Labbe said the company expects to realize an unspecified amount of cost savings as it integrates the operations into its own network.

"We are confident we can extract some significant synergies during that transition and also this will position us very well in Europe and Canada and the U.S. to cover all the customers around the world," he told analysts.

The acquisition will increase Heroux-Devtek's revenues by about 30 per cent with the addition of US$77 million of APPH revenues last year and US$12.5 million in adjusted pre-tax operating earnings.

That will partially replace the US$130 million of revenues that were lost with the August 2012 sale of its aerostructure and industrial products division to Precision Castparts Corp. of Portland, Ore. (NYSE:PCP) for $300 million.

Heroux-Devtek sold the division to concentrate on its core landing gear operations. APPH specializes in the design, engineering and manufacturing of landing gear, hydraulic systems and assemblies for European military and global civilian aircraft.

APPH's proprietary products and after-market parts and service will help to provide more balance and generate more stable and higher revenues and earnings than Heroux's operations, which are more focused on building systems for aircraft manufacturers, including Bombardier, Boeing, Embraer and Dassault.

Labbe said the company will now take a pause from additional acquisitions while it integrates APPH over the next two years and also supply complete landing gear systems for Boeing's 777 and 777X aircraft.

Cameron Doerksen of National Bank Financial said the APPH acquisition is a "perfect fit" for Heroux-Devtek. APPH operates in Heroux's core landing gear segment, has a high degree of higher-margin proprietary products and a good mix of revenue, including aftermarket sales.

The key proprietary programs included the Hawk jet trainer, which accounts for 20 per cent of sales, the SAAB Gripen fighter and AW101 helicopter. In fact, proprietary products will contribute one quarter of overall revenues, up from 11 per cent before the transaction.

While APPH has similar mix of commercial and military business, Heroux is mainly exposed to the U.S. military.

APPH is also focused on Britain and Europe.

Doerksen raised his target price for Heroux-Devtek 18 per cent to $13 on anticipation that APPH will add 10 cents per share in earnings.

Heroux-Devtek reports its third-quarter results on Friday. It is expected to record nine cents per share in adjusted profits on $60 million of revenues, compared with 11 cents per share on $61.74 million a year earlier.

The Canadian Press


Read more Business News

20260


Recent Trending




Today's Market
S&P TSX14303.92+19.49
S&P CDNX992.10-3.91
DJIA16357.8095.24
Nasdaq4057.686+23.524
S&P 5001852.59+9.61
CDN Dollar0.9110+0.0002
Gold1302.30+2.30
Oil104.62+0.87
Lumber324.60+0.40
Natural Gas4.563-0.004

 
Okanagan Companies
Pacific Safety0.11-0.005
Knighthawk0.01-0.005
QHR Technologies Inc1.27-0.08
Cantex0.045-0.005
Anavex Life Sciences0.38-0.0175
Metalex Ventures0.0750.00
Russel Metals30.27-0.12
Copper Mountain Mining2.32-0.07
Colorado Resources0.2650.00
ReliaBrand Inc0.12-0.01
Sunrise Resources Ltd0.025-0.005
Mission Ready Services0.23-0.02

 
19691




FEATURED Property
1917449Marshall Rd
3 bedrooms 1 baths
$11,000
more details
Click here to feature your property
Please wait... loading


Valuation fears grip markets

The Big Picture Valuation fears grip markets Growing concerns about the level of stock market valuations sparked a risk-off trade in global markets this week. Investors are worried that many companies...


Quick and nimble

Photo: ContributedFor many businesses this has been a tremendously difficult time since the 2008 crisis. Business fell off. Sales techniques that always worked, well… stopped working. Customers...


Keeping a clear focus on the future

Many times when we are gripped by fear it can be one of two mental challenges that we can learn to overcome. Photo: ContributedThe Fear is completely imaginary. In this situation there may be no fact...

_



21604

21641


Member of BC Press Council


21188