(Adds details on possible bidders, share price and comment from
By Peter Maushagen, Tim Hepher and Sagarika Jaisinghani
FRANKFURT/PARIS May 5 German aircraft seating
maker Recaro is looking at buying assets from B/E Aerospace
after the U.S. company announced a surprise review that
could lead to a shakeup of the $3 billion cabins industry.
Florida-based B/E Aerospace on Sunday postponed Monday's
investor meeting and said it has hired Citigroup Inc
advisers to explore options, including a possible sale, merger
or spinoff of the company or selected businesses.
The statement came less than two weeks after the company
reported a record quarter for new orders amid rising demand for
wide-bodied jets, and said it was looking at two potential
aerospace acquisitions and had completed a third.
Analysts said the review could lead to a break-up of the
26-year-old company, which has grown through more than two dozen
acquisitions to become one of the largest makers of aircraft
seats, with a leading role in the parts distribution chain.
Asked in Frankfurt whether Recaro Aircraft Seating was
interested in buying any assets from B/E Aerospace, Chief
Executive Mark Hiller told reporters: "We are looking into it".
B/E shares jumped around 10 percent in early U.S. trading on
Monday to $97.99.
In Paris, B/E's closest rival in the seats market, Zodiac
Aerospace, declined to comment. Its shares were down
1.2 percent, slightly lagging a weaker overall market.
"Zodiac cannot be considered a potential bidder on the deal
in our view," said Kepler Cheuvreux analyst Christophe Menard.
Given B/E Aerospace's $9 billion market value, "an
acquisition in full of the company could only be carried out by
a much larger player in aerospace," he said in a note.
But several of the large companies that could bid for all or
part of B/E Aerospace appeared already occupied with other
General Electric Co said last week that its $13.5
billion offer for the power business of France's Alstom
would effectively fill its allotment for acquisitions
through next year, while the company's aviation division is
focused predominantly on manufacturing jet engines.
At United Technologies Corp analysts have said
recently that the diversified manufacturer is more likely to
focus on deals to boost its commercial building businesses,
which sell elevators and climate control systems, than on
On United Technologies' earnings call last month, Chief
Financial Officer Greg Hayes said the idea of striking a big
deal this year was very unlikely.
Honeywell International Inc said in March that it
was planning for $10 billion in deals through 2018 as part of
its five-year financial plan. That deal value would more than
double what Honeywell spent in the previous five years on
acquisitions, but the spending was expected to be spread across
the whole company, not just the aerospace division, which works
primarily on electrical and mechanical systems.
Avionics maker Rockwell Collins took on significant debt
recently to buy Arinc, whose computer networks help flight crew
navigation. That may limit its ability to do a big deal.
Spokesmen for GE, United Technologies, Honeywell and
Rockwell declined to comment.
A bid from within the industry for the seats business would
have to overcome competition hurdles, with Zodiac and B/E
controlling around 70 percent of the market between them.
Buying assets from B/E Aerospace could help Recaro, a family
run firm, to expand in the lucrative market for premium seating.
Recaro says it is the market leader for economy seats, but wants
to expand its grip on profitable premium seats.
On Monday, the unlisted German company reported sales of 337
million euros for 2013 and said it was aiming to reach 600
million in 2018, not including the effects of any acquisitions.
B/E Aerospace makes lavatories for the Boeing 737 and
galleys for the Airbus A350, as well as seats and
oxygen units. It also has a spare parts distribution business.
The company made just over half its 2013 revenue of $3.48
billion from commercial aircraft, with about a third coming from
consumables management, as the spare parts business is known.
Consumables management is the slowest-growing part of the
company. The rest of B/E Aerospace's revenue comes from luxury
fittings for business jets.
In 2008, B/E Aerospace bought the consumables distribution
business of Honeywell for $1 billion to create what it
describes as the world's largest distributor of fasteners or
specialist bolts, operating in a market estimated at $4.5
billion a year.
Most analysts said a sale was most likely to work if B/E
Aerospace split the interiors business from distribution. And
several researchers, including Oppenheimer, said the abrupt
weekend announcement suggested talks were already under way.
B/E Aerospace shares have risen 40 percent in the past year.
In midday trading in New York the stock was up 10.8 percent at
Several brokers raised their price targets to as much as
$121, while noting aerospace acquisitions are looking expensive
as commercial suppliers ride a wave of orders and increases in
B/E Aerospace shares trade at 19.1 times this year's
forecast earnings, compared with an average multiple of 16.3 for
its industry peers, according to Thomson Reuters data.
The company, which has net debt of $1.6 billion, has an
enterprise value of 11.6 times its forecast earnings before
interest, tax, depreciation and amortisation, giving it a
premium over the sector average of 10.2, according to the data.
Scott Thompson, who heads PricewaterhouseCoopers' aerospace
and defence coverage, said the announcement from B/E underscored
growing interest in acquisition and mergers.
"We see things heating up," said Thompson, who put out a
study last week predicting increased M&A activity this year.
B/E management likely has a clear idea of what they can get
for the company, and is in a strong position having posted
robust earnings in a market ripe with potential investors, said
George Young, a partner at St. Denis J. Villere & Co LLC, which
owns about 2 percent of the company.
He's hoping for a deal priced at the top end of broker
"If it's less than $120 per share, then I would be somewhat
disappointed," Young said.
(Additional reporting by Victoria Bryan, Cyril Altmeyer, Andrea
Shalal, Soyoung Kim, Lewis Krauskopf and Alwyn Scott, Writing by
Victoria Bryan, Tim Hepher,; Editing by Erica Billingham; and