| NEW YORK
NEW YORK May 15 Activist investment firm
Relational Investors LLC reported a 3.5 percent stake in B/E
Aerospace Inc on Thursday and said it will monitor the
company's ongoing process to evaluate strategic alternatives to
maximize shareholder value.
The Florida-based aircraft seat maker and parts distributor
made a surprise announcement on May 4 that it had hired
Citigroup Inc to explore options, including a possible
sale, merger or spinoff of the company or selected businesses.
The announcement was widely seen as signaling it had already
received an approach or was in detailed talks with a potential
buyer, but people familiar with the matter told Reuters that B/E
was not in advanced talks with any party.
Relational, founded by investor Ralph Whitworth, started
buying shares in the $10.3 billion company in February and met
with its management in April to discuss strategic options,
according to people familiar with the investment firm's
Relational believes that B/E's core, high-return aerospace
interiors segment has been weighed down by its diversification
into a low-margin consumables business in recent years, the
B/E 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 International Inc 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.
While Relational's suggestions likely served as a catalyst
for the company to launch a sale process formally, B/E Aerospace
itself had been considering strategic options before the
investor showed up, the people said.
B/E could not be immediately reached for comment.
"B/E Aerospace has great core assets and a strong
competitive position," said Matthew Hepler, managing director of
research at Relational Investors, said in a statement.
"We welcome the company's announcement to explore strategic
alternatives and will encourage the board to evaluate and pursue
opportunities, in a disciplined manner, that will maximize value
for all shareholders."
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.
Most analysts said a sale was most likely to work if B/E
Aerospace split the interiors business from distribution.
That would result in a breakup 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.
(Editing by Nick Zieminski)