TransDigm Group will buy Calspan, a respected provider of highly engineered testing and technology development services and systems primarily for the aerospace and defense industry, the company announced March 14.
Calspan’s transonic wind tunnel at its Buffalo, New York, headquarters is used for aftermarket-focused development activities, as well as jet engine testing and hypersonics development and testing. The company operates seven primary facilities in New York, Virginia, Minnesota and California and employs around 625 people.
“We see opportunity for TransDigm’s proven operating model to enhance [Calspan’s] established positions across a diverse range of aftermarket-focused aerospace and defense development and testing services,” TransDigm CEO Kevin Stein said. “The company operates within our primary aerospace and defense industry, and its unique service offerings exhibit the earnings stability and growth potential that we have come to expect of our aerospace components-centered businesses.”
TransDigm did not immediately disclose the purchase price, but financial analysts said it was likely $700-725 million. The acquisition is expected to close this fiscal year for TransDigm, assuming customary regulatory approvals and closing conditions are met.
Analysts applauded the deal. “We believe this acquisition is a positive for TransDigm, as it falls very well within its merger and acquisition criteria–a highly technical and specialized company that is likely accretive to the overall margin profile,” RBC Capital Markets analyst Ken Herbert said.
TransDigm is one of the most active and successful acquirers in aerospace and defense, and its deals and rate of dealmaking are seen as markers for the rest of industry, analysts such as Herbert say. While this acquisition will likely be seen as a positive, it represented a slight change for TransDigm in that Calspan is know more for testing and related services than parts manufacturing.
“This may limit the eventual pricing upside, but the business could potentially offer other synergies that can help with returns. Management did indicate that it expects the acquisition to hit its M&A hurdle rates,” Herbert noted.
