Strategy

Rockwell to Acquire B/E Aerospace for $6.4B

"It’s really the transition to the digital airplane that's creating the perfect timing to bring these two entities together," Rockwell says.
Matthew HellerOctober 24, 2016
Rockwell to Acquire B/E Aerospace for $6.4B

Two of the largest suppliers to the aerospace industry have agreed to merge, with Rockwell Collins adding B/E Aerospace’s range of products for aircraft interiors to its cabin electronics and information management capabilities.

Under a deal announced Sunday, Rockwell will pay $6.4 billion, or $62 a share, for B/E Aerospace, one of the world’s largest makers of aircraft seats and other interior fittings such as galleys. The price represents a 22.5% premium to B/E’s closing price on Friday.

“This transformational acquisition is consistent with our strategy to accelerate growth and build value through market-leading positions in cockpit and cabin solutions,” Rockwell CEO Kelly Ortberg said in a news release. “We see tremendous opportunity to better serve our commercial aviation, business jet and military customers through broader offerings.”

He added that the merger would further the development of “smart network technologies and connectivity solutions to significantly enhance aircraft uptime and airline profitability while improving the experience of passengers and airline personnel.”

Rockwell focuses on cockpit and cabin systems and other electronics for passenger, business and military jets. According to The Wall Street Journal, B/E has half the market for coach seats and an even bigger slice of luxury business-class seats that can cost more than $100,000 each.

“Both companies face challenges such as a stagnant business jet market and a slowdown in orders for widebody jets, the most valuable market for their products,” the WSJ said.

But Ortberg noted that hundreds of older widebodies are expected to be upgraded with new seats and systems over the next several years. Aircraft will feature better entertainment and connectivity in business and coach cabins.

“It’s really the transition to the digital airplane that’s creating the perfect timing to bring these two entities together,” Ortberg told Reuters.

Rockwell has a market value of about $11 billion, more than twice the size of B/E Aerospace, which has a market value of $5.1 billion. In trading Monday, Rockwell shares fell 6.2% to $79.21, while B/E’s rose more than 16% to $58.89.