M&A

Boeing Buys KLX to Boost Services Business

The $3.2 billion acquisition is the "next step" in Boeing's strategy of growing a business it hopes will reach $50 billion in sales in five years.
Matthew HellerMay 1, 2018

Boeing announced Tuesday it had agreed to acquire aerospace parts supplier KLX for $3.2 billion in a move to grab a bigger share of the lucrative aircraft services business.

KLX’s aerospace solutions group will join Boeing’s effort to triple its aircraft services business to $50 billion in sales in five years, from $15 billion last year. The group’s 2017 revenue was $1.4 billion.

Boeing will pay $63 per share for KLX, with the deal contingent upon KLX divesting its small energy-services unit.

“This acquisition is the next step in our services growth strategy, with a clear opportunity to profitably grow our business and better serve our customers in a $2.6 trillion, 10-year services market,” Stan Deal, CEO of Boeing Global Services, said in a news release.

The Global Services unit includes Aviall, a parts maker which Boeing acquired for $2 billion in 2006. “By combining the talent and product offerings of Aviall and KLX Inc., we will provide a one-stop-shop that will benefit our supply chain and our various customers in a meaningful way,” Deal added.

As The Wall Street Journal reports, Boeing and rival Airbus “have been flying high … amid strong global demand for travel.” But they have also been looking to win a larger share of the services business as airlines have been demanding steeper discounts on their aircraft purchases.

Services, including parts, training, and data processing, “generates sales for longer than the 20 years or so planes are in services and typically carries higher margins,” the WSJ noted.

KLX stock had risen about 24% since Dec. 22, when the company said it would review strategic alternatives including a potential sale. In trading Tuesday, the shares fell 8.6% to $71.50, reflecting investor concern over the sale price to Boeing and the future of the energy-services unit.

“The combination of Aviall and KLX Aerospace facilitates the broadest scope of parts and products to support all customer fleet types for the commercial, military and defense and business and general aviation markets,” Amin Khoury, chief executive of KLX, said.

Case Study: How Edgewood Tahoe’s CFO Saved 500 Jobs From the Ashes