In a deal that expands its commercial business and broadens its portfolio of advanced electronics, Britain’s Cobham plc on May 20 said it has agreed to acquire New York-based
Aeroflex Corp. [ARX], which makes provides microelectronics products and test solutions to a diverse portfolio of customers in aerospace, space, wireless, medical, defense, energy and other industries.
The enterprise value of the deal, which is scheduled to close in the third quarter, is valued at just under $1.5 billion, with $920 million to be used to purchase Aeroflex stock and $540 million in debt assumption. The $10.50 purchase price per share of Aeroflex stock represents a 26 percent premium above the closing price of the company’s stock on May 19.
Cobham, which did about $3 billion in sales last year, with commercial business representing 35 percent of that, is poised to generate 41 percent of sales in the commercial market if the Aeroflex transaction closes. Aeroflex expects its sales in its fiscal year that ends in June to be between $625 million and $635 million, with about 70 percent of the business in commercial markets.
The Aeroflex deal builds on two other acquisitions Cobham completed in the past two years in the wireless communications space, one for Britain’s Axell Wireless and the other for Danish satellite communications firm Thrane & Thrane.
“The acquisition of Aeroflex is absolutely aligned with our strategic objective to obtain more exposure to growing, commercially oriented end markets that increasingly demand more data, connectivity and bandwidth,” Bob Murphy, Cobham’s CEO, said in a statement. “The scale and complementary nature of the combination enables our two technology businesses to unlock significant synergy benefits to generate increased shareholder value, while supporting our customers even more effectively.
Cobham expects the acquisition will provide it in about $85 million in annual synergies through cost savings and improved operating efficiencies.
Although based in the United States, only 55 percent of Aeroflex’ sales are to customers in this country. The company does about 21 percent of its business in Asia, 20 percent in Europe and the Middle East, and 4 percent elsewhere. The company’s portfolio of name brand commercial customers include France’s Alcatel Lucent [ALU], Cisco Systems [CSCO], Sweden’s Ericsson [ERIC], Motorola Solutions [MSI], Finland’sNokia [NOK] and The Netherlands’ Philips [PHG]. In the aerospace arena, its customers include Boeing [BA], Honeywell [HON], Lockheed Martin [LMT], Northrop Grumman [NOC], and Raytheon [RTN].
Aeroflex’ microelectronics products include semiconductors and circuit cards, microwave and radio frequency and motion controls. The company has about 2,600 employees.
The deal is subject to regulatory approvals in the United States, namely the Committee on Foreign Investment in the United States, and Hart-Scott-Rodino antitrust review, and approvals by the boards of both companies. Aeroflex’s private equity investors, Veritas Capital, Golden Gate Private Equity, and GS Direct LLC, which combined represent 76 percent of the voting capital, are in favor of the acquisition.
Aeroflex’ lead financial adviser is Goldman, Sachs & Co. and Stifel Nicolas is the co-financial adviser. Bank of America’s Merrill Lynch International subsidiary is advising Cobham on the acquisition and the company’s financial advisor is Citigroup.