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Exclusive: B/E Aerospace not in advanced deal talks - sources
May 6, 2014 / 6:35 PM / 3 years ago

Exclusive: B/E Aerospace not in advanced deal talks - sources

NEW YORK (Reuters) - B/E Aerospace BEAV.O, which made a surprise announcement of reviewing strategic alternatives on Sunday, is actively engaging in early stage conversations with potential buyers but is not in advanced talks with any company, according to people familiar with the matter.

The Florida-based aircraft seat maker and parts distributor is preparing to invite bids for its two separate businesses and working on detailed financial information to send to potentially interested parties in the near term, the people said.

On Sunday, the company canceled an investor presentation set for Monday and disclosed that it had hired Citibank (C.N) to review strategic alternatives, moves widely seen as signaling it had already received an approach or was in detailed talks with a potential buyer of all or part of the business.

According to the people familiar with the matter, the company has not been negotiating any deal recently, though it has had informal conversations with interested parties over the years.

The people asked not to be named because the matter is not public. Representatives for B/E Aerospace declined to comment.

The Sunday announcement surprised investors, coming after the company said in April that it was working on acquisitions of its own. It prompted a 9.2 percent jump in the shares on Monday and spurred speculation about a range of potential suitors, from Airbus (AIR.PA) and Boeing Co (BA.N) to United Technologies Corp (UTX.N) and General Electric (GE.N).

B/E Aerospace shares were up 0.7 percent to $97.94 in afternoon trading on Tuesday, giving it a market capitalization of roughly $10.3 billion.

B/E Aerospace is a major maker of seats and other interior products for commercial and business jets. It also has a business that distributes fasteners and replacement parts to the aerospace industry.

Given the disparate business lines, B/E will explore the prospect of finding two separate buyers for the cabin interiors business and the distribution unit, people familiar with the matter said.

The company’s sheer size as well as its high valuation could limit the universe of likely buyers.

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 has an enterprise value of 11.6 times its forecast earnings before interest, tax, depreciation and amortization, giving it a premium over the sector average of 10.2, according to the data.

In addition, several of the large companies that could bid for all or part of B/E Aerospace appeared already occupied with other acquisition strategies.

General Electric Co (GE.N) said last week that its $13.5 billion offer for the power business of France’s Alstom (ALSO.PA) 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 (UTX.N), 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 aerospace.

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 (HON.N) said in March that it was planning for $10 billion in deals through 2018 as part of its five-year financial plan. The spending was expected to be spread across the whole company, not just the aerospace division, which works primarily on electrical and mechanical systems.

European planemaker Airbus (AIR.PA), which was cited by analysts as a potential bidder for B/E Aerospace’s distribution business, is currently not interested in looking at the company, two people familiar with the matter told Reuters on Tuesday.

Reporting by Mike Stone and Soyoung Kim in New York; Editing by Alwyn Scott and Andrew Hay

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