Meggitt extends its aerospace reach

Aircraft instrumentation specialist Meggitt added US aerospace components group Whittaker to its Airbus-related activities last week in a £240m deal – its biggest-ever acquisition. Whittaker, a fire detection system and control valves specialist, is a major Airbus supplier. Meggitt, already a key provider of parts to Boeing, will now have products on each of the […]

Aircraft instrumentation specialist Meggitt added US aerospace components group Whittaker to its Airbus-related activities last week in a £240m deal – its biggest-ever acquisition.

Whittaker, a fire detection system and control valves specialist, is a major Airbus supplier. Meggitt, already a key provider of parts to Boeing, will now have products on each of the two companies’ new airliners.

Finance director Terry Twigger said: `It’s a very exciting deal. It will allow Meggitt to transform itself from a components supplier to a more systems-led group. It dovetails nicely with our existing components businesses.’

He put the likely cost savings at £5m a year, but said there would be `minimal’ job losses.

The deal also gives Meggitt greater access to the lucrative components aftermarket, which Twigger said would put it in a good position to weather any downturn.

`This is a higher margin business where we can deliver a high value-added service. As the age of aircraft in service rises they will need more servicing and parts. It’s a very good business to be in.’

The company is funding the deal through a $28-a-share cash payment with the balance being funded through a rights issue.

Twigger said gearing would rise to 135% after the acquisition, but this would come down to about 100% over the next 18 months, reflecting Whittaker’s strong cash generation and the prospect of more non-core disposals by Meggitt.

Meggitt plans to move one of its US operations, a metallic ducting factory in North Hollywood, California, to Whittaker’s controls business 15 miles away. The workforce will be offered jobs at the new plant, Twigger said.

The purchase price represents an exit multiple of about 9.6 times, based on Whittaker’s earnings before interest of £24.5m last year. Whittaker also had sales of £81.9m from continuing operations last year and margins of about 30%.

The City reacted well to the deal, Meggitt shares rising 9p to 194.5p.

The company, which spent £68m on acquisitions last year, including the £44m purchase of vibration monitoring equipment maker Vibro-Meter, has received support from industry analysts who like its broad spread of aerospace industry activities.

The City expects the aerospace market to continue growing until the end of 2000, then tail off gradually over the following years.