- Meaningfully scales AAR's repair capabilities and is highly
complementary to existing portfolio
- Significantly accretive to margins and expands customer base
and global footprint
- Expected run-rate cost synergies of $10 million
- Expected to be accretive to revenue growth and Adjusted EPS in
the first full fiscal year
- Strong combined free cash flow expected to
enable deleveraging
WOOD
DALE, Ill., Dec. 21,
2023 /PRNewswire/ -- AAR CORP. (NYSE: AIR), a
leading provider of aviation services to commercial and government
operators, MROs, and OEMs, has entered into a definitive agreement
with Triumph Group (NYSE: TGI) to purchase Triumph Product Support
for $725 million in cash. As part of
the transaction, AAR expects to receive estimated tax benefits with
a present value of approximately $80
million. Including the estimated tax benefits, the effective
purchase price multiple is expected to be 11.7x FY2024 EBITDA and
9.9x including estimated run-rate synergies of $10 million.
Triumph Product Support is a leading global provider of
specialized maintenance, repair, and overhaul capabilities for
critical aircraft components in the commercial and defense markets.
The company provides MRO services for structural components, engine
and airframe accessories, interior refurbishment, and wheels and
brakes. Additionally, Triumph Product Support designs proprietary
designated engineering representative (DER) repairs and Parts
Manufacturer Approval (PMA) parts.
Triumph Product Support services both the commercial and
military aftermarkets across five primary locations with a highly
skilled workforce of over 700 employees. The business is
projected to generate approximately $280
million of revenue and $55
million of EBITDA, representing an EBITDA margin of 20%, in
its fiscal year ending March 31,
2024.
"Today we are very excited to announce the execution of an
agreement with Triumph to acquire
its Product Support business. Triumph Product Support has built an
excellent reputation for high quality and differentiated repair
offerings. This highly strategic acquisition will deepen and
broaden our customer relationships globally and expand our
footprint. Furthermore, the addition of this high-margin business
is expected to further increase our operating margin and is
expected to be accretive to our earnings. We look forward to
welcoming Product Support's talented team to AAR," said
John M. Holmes Chairman, President
and Chief Executive Officer of AAR CORP.
AAR's acquisition of Triumph Product Support is supported by a
fully committed bridge facility. AAR intends for permanent
financing to include a mix of debt and equity to maintain a strong
balance sheet to support future growth. AAR will target pro forma
net leverage to be approximately 3.0x at closing, inclusive of a
potential equity issuance subject to market conditions. After
closing, we expect strong combined free cash flow to enable further
deleveraging.
The transaction is expected to close in the first quarter of the
2024 calendar year, subject to customary closing conditions,
including receipt of certain regulatory approvals.
For more information on the acquisition, review slides available
here. For more information on AAR, visit aarcorp.com.
AAR will discuss the acquisition of Triumph Product Support on
its earnings conference call to be held today at 3:45 p.m. Central time. The conference call may
be accessed by registering
at https://register.vevent.com/register/BIe408558c6b344fb2aca2a3d5d43d47f9.
Once registered, participants will receive a dial-in number and a
unique PIN that will allow them to access the call.
Advisors
BofA Securities is acting as lead financial
advisor, Wells Fargo Securities, LLC is acting as financial
advisor, and Latham & Watkins LLP is acting as legal counsel to
AAR. Wells Fargo Securities, LLC and BofA Securities are providing
AAR with committed bridge financing for the transaction.
About AAR
AAR is a global aerospace and defense
aftermarket solutions company with operations in over 20 countries.
Headquartered in the Chicago area,
AAR supports commercial and government customers through four
operating segments: Parts Supply, Repair & Engineering,
Integrated Solutions, and Expeditionary Services. Additional
information can be found at aarcorp.com.
About Triumph
TRIUMPH, headquartered in Radnor, Pennsylvania, designs, engineers,
manufactures, repairs and overhauls a broad portfolio of aerospace
and defense systems and components. The company serves the global
aviation industry, including original equipment manufacturers and
the full spectrum of military and commercial aircraft
operators.
More information about TRIUMPH
can be found on the Company's website at
www.triumphgroup.com.
Forward-looking Statements
This press release contains
certain statements relating to future business opportunities and
conditions, as well as anticipated benefits of the proposed
acquisition by AAR CORP. (the "Company") of Triumph Group's Product
Support business (the "Acquisition") and expected contributions of
the Triumph Group Product Support business to the Company's future
financial results. Such statements are forward-looking statements
as that term is defined in the Private Securities Litigation Reform
Act of 1995 and reflect management's expectations about future
conditions. Forward-looking statements may also be identified
because they contain words such as "anticipate," "believe,"
"continue," "could,'' "estimate," "expect," "intend," "likely,"
"may," "might," "plan," "potential," "predict," "project," "seek,"
"should," "target," "will," "would," or similar expressions and the
negatives of those terms. Factors that may cause actual results to
differ materially from current expectations include, among others,
risks associated with the Company's ability to consummate the
Acquisition and the timing of the Acquisition; the Company's
ability to successfully integrate the acquired business; the
Company's ability to realize the anticipated benefits and synergies
of the Acquisition as rapidly or to the extent anticipated; risks
related to the Company's ability to obtain any contemplated
financing on favorable terms or at all; the effect of the
announcement of the Acquisition on the Company's operating results
and business generally; the amount of costs, fees and expenses
related to the Acquisition; and other factors that could affect the
Company's business. These forward-looking statements are based on
beliefs of Company management, as well as assumptions and estimates
based on information currently available to the Company, and are
subject to certain risks and uncertainties that could cause actual
results to differ materially from historical results or those
anticipated. For a discussion of these and other risks and
uncertainties, refer to "Risk Factors" in the Company's most recent
Annual Report on Form 10-K and subsequent Quarterly Reports on Form
10-Q. Should one or more of these risks or uncertainties
materialize adversely, or should underlying assumptions or
estimates prove incorrect, actual results may vary materially from
those described and the anticipated benefits of the Acquisition may
not be realized. These events and uncertainties are difficult or
impossible to predict accurately and many are beyond the Company's
control. The Company cautions readers not to place undue reliance
upon any such forward-looking statements, which speak only as of
the date made. The Company assumes no obligation to update any
forward-looking statements to reflect events or circumstances after
the date of such statements or to reflect the occurrence of
anticipated or unanticipated events, except as required by law.
Non-GAAP Financial Measures
This press release
contains certain financial measures that are not recognized under
U.S. generally accepted accounting principles (GAAP), including
Triumph Product Support's forecasted EBITDA and EBITDA margin for
its fiscal year ending March 31,
2024. The Company is unable to provide a reconciliation
between Triumph Product Support's forecasted EBITDA and EBITDA
margin to its net income metric without unreasonable effort due to
the unavailability of reliable estimates for certain items.
https://www.aarcorp.com/globalassets/8.-investor-relations/events/triumph-product-support-acquisition-presentation.pdf
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SOURCE AAR CORP.