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CEDAR RAPIDS — Rockwell Collins on Sunday said it will buy B/E Aerospace, a manufacturer of aircraft passenger cabin interior products, for $6.4 billion in cash and stock, plus the assumption of $1.9 billion in net debt.
The purchase of Wellington, Fla.-based B/E Aerospace, with its 10,000 employees, is the largest acquisition by the Cedar Rapids-based avionics and communications provider as a publicly traded company. It previously bought ARINC Inc. in 2013 for $1.4 billion from the Carlyle Group.
Once the deal is approved, Rockwell Collins would have nearly 30,000 employees, $8.1 billion in revenues and $1.9 billion in earnings before interest, taxes and amortization for the year that ended on Sept. 30, 2016.
B/E Aerospace manufactures seating, food and beverage preparation and storage equipment, lighting and oxygen systems, and modular galley and lavatory systems for commercial airliners and business jets. Rockwell Collins already supplies flight deck avionics, cabin electronics, mission communications, simulation and training, and information management systems.
The combination is expected to produce cost savings of about $160 million and provide a double-digit boost to per-share earnings in the first full year, the companies said. They also anticipate it generating more than $6 billion in free cash flow over five years.
The cash portion of the deal, which is subject to the approval of Rockwell Collins and B/E Aerospace shareholders and regulators, will be financed with additional debt. It is expected to close in the spring 2017.
Under the terms of the agreement, B/E Aerospace shareholders will receive $34.10 per share in cash and a number of Rockwell Collins shares of common stock equal to $27.90. After the transaction is completed, current B/E Aerospace shareholders will own about 20 percent of the combined company.
'This transformational acquisition is consistent with our strategy to accelerate growth and build value through market-leading positions in cockpit and cabin solutions,' said Kelly Ortberg, chairman, president and CEO of Rockwell Collins, in a news release.
Rockwell Collins will increase the size of its board of directors to 11 members with the addition of two B/E Aerospace board members. Werner Lieberherr, CEO of B/E Aerospace, will become executive vice president and chief operating officer of a newly created aircraft interior systems segment for Rockwell Collins.
The purchase of B/E Aerospace comes on the heels of an Oct. 14 announcement by Rockwell Collins that it is reducing its global workforce by 400 to 600 employees over the current fiscal year that ends on Sept. 30, 2017. The reduction by layoffs, retirements and attrition is due to a slowdown in the business jet market and cost-saving measures by airlines.