- Transformative transaction
accelerates growth and strengthens Rockwell Collins’ position as a
leading supplier of cockpit and cabin solutions
- Expected to generate run-rate
pre-tax cost synergies of approximately $160 million
- Double-digit accretive to earnings
per share in first full fiscal year with expected combined
five-year free cash flow generation in excess of $6
billion
- Diversifies and balances portfolio
across OEM, airline and aftermarket
Rockwell Collins (NYSE: COL), a global leader in high-integrity
solutions for aerospace and defense, and B/E Aerospace (NASDAQ:
BEAV), the world’s leading manufacturer of aircraft cabin interior
products, today announced that they have entered into a definitive
agreement under which Rockwell Collins will acquire B/E Aerospace
for approximately $6.4 billion in cash and stock, plus the
assumption of $1.9 billion in net debt.
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Under the terms of the agreement, each B/E Aerospace shareowner
will receive total consideration of $62.00 per share, comprised of
$34.10 per share in cash and $27.90 in shares of Rockwell Collins
common stock, subject to a 7.5% collar. This represents a premium
of 22.5% to the closing price of B/E Aerospace common stock on
Friday, October 21, 2016.
The transaction combines Rockwell Collins’ capabilities in
flight deck avionics, cabin electronics, mission communications,
simulation and training, and information management systems with
B/E Aerospace's range of cabin interior products, which include
seating, food and beverage preparation and storage equipment,
lighting and oxygen systems, and modular galley and lavatory
systems for commercial airliners and business jets.
The acquisition significantly increases Rockwell Collins’ scale
and diversifies its product portfolio, customer mix and geographic
presence. On a pro forma basis, Rockwell Collins would have nearly
30,000 employees, $8.1 billion in revenues and $1.9 billion in
EBITDA for the twelve months ending September 30, 2016.
“This transformational acquisition is consistent with our
strategy to accelerate growth and build value through
market-leading positions in cockpit and cabin solutions,” said
Kelly Ortberg, Chairman, President and Chief Executive Officer of
Rockwell Collins. “We see tremendous opportunity to better serve
our commercial aviation, business jet and military customers
through broader offerings.”
Ortberg continued, “B/E Aerospace has a leading position in
nearly all the segments it serves and a highly visible, long-cycle
backlog. Beyond new aircraft deliveries, its $12 billion installed
base provides a strong flow of aftermarket retrofit opportunities
that balances our current cyclical exposure to OEM production
rates. Additionally, our combined portfolio uniquely positions us
to integrate cabin products, smart network technologies and
connectivity solutions to significantly enhance aircraft uptime and
airline profitability while improving the experience of passengers
and airline personnel.”
Ortberg added, “We expect to generate significant run-rate cost
synergies and over $6 billion in free cash flow over the next five
years with expected free cash flow conversion of greater than 100
percent. In addition, by leveraging our respective airline and OEM
relationships, as well as Rockwell Collins’ business jet dealer
network and military aircraft positions, we firmly believe there
are revenue synergies that create meaningful upside to our business
case.”
B/E Aerospace Founder and Chairman, Amin Khoury, stated, “Our
combination with Rockwell Collins represents an excellent outcome
for B/E Aerospace’s stockholders, who will receive an immediate
premium as well as a substantial equity interest in a strong
combined company with a broader range of products, customers, and
the combined expertise and resources to create future value. We
feel confident that this combination delivers significant long-term
benefits neither company could realize on its own. We look forward
to becoming part of Rockwell Collins and leveraging their
technology to accelerate our long-term growth as we embark on the
next chapter in the company’s history.”
Ortberg concluded, “I’m excited to welcome B/E Aerospace’s
talented employees and bring together two industry leaders with
complementary capabilities and strong reputations for innovation,
quality and delivering sustained customer value.”
Significant cost synergies and additional benefits
The transaction is expected to generate run-rate pre-tax cost
synergies of approximately $160 million ($125 million after tax).
In addition, Rockwell Collins expects to make certain conforming
purchase accounting adjustments resulting in improved pre-tax
earnings of approximately $60 to $90 million per year for the first
six years after the acquisition. The transaction is expected to be
double-digit accretive to earnings per share in the first full
fiscal year.
Transaction Terms and Financing
Under the terms of the agreement, B/E Aerospace shareholders
will receive $34.10 per share in cash and a number of Rockwell
Collins shares of common stock equal to $27.90, with such number of
shares of Rockwell Collins common stock determined based on the
volume weighted average closing price of Rockwell Collins common
stock for the 20 trading days ending on the day prior to closing
(provided that this volume weighted average price is no less than
$77.41 and no greater than $89.97 per share). If the volume
weighted average price of Rockwell Collins common stock during this
period is above $89.97, the stock portion of the consideration will
be fixed at 0.3101 shares of Rockwell Collins common stock for each
share of B/E Aerospace, and if it is below $77.41 per share, the
stock portion of the consideration will be fixed at 0.3604 shares
of Rockwell Collins common stock for each share of B/E
Aerospace.
Upon completion of the transaction, which is expected in the
spring of 2017, current B/E Aerospace shareowners will own
approximately 20 percent of the combined company.
Rockwell Collins expects to finance the cash portion of the
transaction with debt financing, a significant portion of which has
been committed. Upon completion of the transaction, Rockwell
Collins is expected to maintain a strong investment grade credit
rating with net debt of approximately $7.5 billion, and plans to
maintain its current dividend policy. Rockwell Collins intends to
pay down $1.5 billion of the new debt by the end of its fiscal 2019
while curtailing its share repurchase program to a level sufficient
to offset dilution.
The transaction, which was unanimously approved by the boards of
directors of both companies, is subject to the approval of Rockwell
Collins and B/E Aerospace shareowners, regulatory approvals and
other customary conditions.
Governance
Upon close of the transaction, Rockwell Collins will increase
the size of its Board to 11 members with the addition of two B/E
Aerospace board members. Werner Lieberherr, CEO of B/E Aerospace,
will become Executive Vice President and Chief Operating Officer of
a newly created aircraft interior systems segment for Rockwell
Collins.
Advisors
J.P. Morgan Securities LLC served as financial advisor to
Rockwell Collins and Skadden, Arps, Slate, Meagher & Flom
served as legal counsel. Citigroup and Goldman, Sachs & Co.
served as financial advisors to B/E Aerospace and Shearman and
Sterling LLP served as legal counsel.
Conference Call
Rockwell Collins and B/E Aerospace executives will discuss the
transaction in Rockwell Collins’ earnings webcast on Monday,
October 24th at 8:30 a.m. ET. A link to the webcast and an investor
presentation can be found on the Investor Relations sections of the
Rockwell Collins and B/E Aerospace websites
at http://investor.rockwellcollins.com/investor-relations/corporate-profile/default.aspx
and
http://investor.beaerospace.com/phoenix.zhtml?c=78014&p=irol-IRHome.
Separately today, Rockwell Collins issued its fourth quarter
2016 financial results and B/E Aerospace issued its third quarter
2016 financial results. Due to the pending Rockwell Collins and B/E
Aerospace transaction, both Rockwell Collins and B/E Aerospace have
canceled their previously scheduled earnings conference calls and
webcasts.
For more information about the transaction, visit
http://rockwellcollins.acquisitionannouncement.com.
About Rockwell Collins
Rockwell Collins (NYSE: COL) is a pioneer in the development and
deployment of innovative aviation and high-integrity solutions for
both commercial and government applications. Our expertise in
flight deck avionics, cabin electronics, mission communications,
simulation and training, and information management is delivered by
a global workforce, and a service and support network that crosses
more than 150 countries. To find out more, please visit
www.rockwellcollins.com.
About B/E Aerospace
B/E Aerospace is the world’s leading manufacturer of aircraft
cabin interior products. B/E Aerospace designs, develops and
manufactures a broad range of products for both commercial aircraft
and business jets. B/E Aerospace manufactured products include
aircraft cabin seating, lighting systems, oxygen systems, food and
beverage preparation and storage equipment, galley systems, and
modular lavatory systems. B/E Aerospace also provides cabin
interior reconfiguration, program management and certification
services. B/E Aerospace sells and supports its products through its
own global direct sales and product support organization. For more
information, visit the B/E Aerospace website at
www.beaerospace.com.
Non-GAAP Financial Information
The Non-GAAP EBITDA information included in this press release
is believed to be useful to investors’ understanding and assessment
of the combined Company. The Company does not intend for the
information to be considered in isolation or as a substitute for
the related GAAP measures. The table below explains the EBITDA
calculation in more detail for the twelve-month period from October
1, 2015 through September 30, 2016.
($ in billions)12 months ended
9/30/2016 RockwellCollins B/EAerospace
ProForma Income from continuing operationsbefore income taxes $
0.94 $ 0.43 $ 1.37 Interest expense
0.06 0.09 0.16 Depreciation and amortization 0.25
0.08 0.34 Earnings before interest, taxes
depreciationand amortization (EBITDA) $ 1.25 $ 0.61
$ 1.86
Safe Harbor Statement
This press release contains statements, including statements
regarding certain projections, business trends, and the proposed
acquisition of B/E Aerospace that are forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those projected as a
result of certain risks and uncertainties, including but not
limited to the financial condition of our customers and suppliers,
including bankruptcies; the health of the global economy, including
potential deterioration in economic and financial market
conditions; adjustments to the commercial OEM production rates and
the aftermarket; the impacts of natural disasters and pandemics,
including operational disruption, potential supply shortages and
other economic impacts; cybersecurity threats, including the
potential misappropriation of assets or sensitive information,
corruption of data or operational disruption; delays related to the
award of domestic and international contracts; delays in customer
programs, including new aircraft programs entering service later
than anticipated; the continued support for military transformation
and modernization programs; potential impact of volatility in oil
prices, currency exchange rates or interest rates on the commercial
aerospace industry or our business; the impact of terrorist events
on the commercial aerospace industry; changes in domestic and
foreign government spending, budgetary, procurement and trade
policies adverse to our businesses; market acceptance of our new
and existing technologies, products and services; reliability of
and customer satisfaction with our products and services; potential
unavailability of our mission-critical data and voice communication
networks; unfavorable outcomes on or potential cancellation or
restructuring of contracts, orders or program priorities by our
customers; recruitment and retention of qualified personnel;
regulatory restrictions on air travel due to environmental
concerns; effective negotiation of collective bargaining agreements
by us, our customers, and our suppliers; performance of our
customers and subcontractors; risks inherent in development and
fixed-price contracts, particularly the risk of cost overruns; risk
of significant reduction to air travel or aircraft capacity beyond
our forecasts; our ability to execute to internal performance plans
such as restructuring activities, productivity and quality
improvements and cost reduction initiatives; achievement of ARINC
integration and synergy plans as well as our other acquisition and
related integration plans; continuing to maintain our planned
effective tax rates; our ability to develop contract compliant
systems and products on schedule and within anticipated cost
estimates; risk of fines and penalties related to noncompliance
with laws and regulations including compliance requirements
associated with U.S. Government work, export control and
environmental regulations; risk of asset impairments; our ability
to win new business and convert those orders to sales within the
fiscal year in accordance with our annual operating plan; and the
uncertainties of the outcome of lawsuits, claims and legal
proceedings, risk that one or more closing conditions to the
acquisition of B/E Aerospace, including certain regulatory
approvals, may not be satisfied or waived, on a timely basis or
otherwise, including that a governmental entity may prohibit, delay
or refuse to grant approval for the consummation of the proposed
transaction, may require conditions, limitations or restrictions in
connection with such approvals or that the required approval by the
shareholders of each of B/E Aerospace and Rockwell Collins may not
be obtained; risk of unexpected costs, charges or expenses
resulting from the proposed acquisition of B/E Aerospace;
uncertainty of the expected financial performance of the combined
company following completion of the proposed acquisition of B/E
Aerospace; failure to realize the anticipated benefits of the
proposed acquisition of B/E Aerospace, including as a result of
delay in completing the proposed transaction or integrating the
businesses of Rockwell Collins and B/E Aerospace; risk to the
ability of the combined company to implement its business strategy;
risk of an occurrence of any event that could give rise to
termination of the merger agreement; risk that stockholder
litigation in connection with the proposed transaction may affect
the timing or occurrence of the contemplated merger or result in
significant costs of defense, indemnification and liability as well
as other risks and uncertainties, including but not limited to
those detailed herein and from time to time in our Securities and
Exchange Commission filings. These forward-looking statements are
made only as of the date hereof and the company assumes no
obligation to update any forward-looking statement.
No Offer or Solicitation
This communication is for informational purposes only and not
intended to and does not constitute an offer to subscribe for, buy
or sell, the solicitation of an offer to subscribe for, buy or sell
or an invitation to subscribe for, buy or sell any securities or
the solicitation of any vote or approval in any jurisdiction
pursuant to or in connection with the proposed transaction or
otherwise, nor shall there be any sale, issuance or transfer of
securities in any jurisdiction in contravention of applicable law.
No offer of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended, and otherwise in accordance with
applicable law.
Additional Information and Where to Find It
In connection with the proposed transaction, Rockwell Collins
will prepare a registration statement on Form S-4 that will include
a joint proxy statement/prospectus (the “Joint Proxy
Statement/Prospectus”) for the stockholders of B/E Aerospace and
Rockwell Collins to be filed with the SEC, and each will mail the
Joint Proxy Statement/Prospectus to their respective stockholders
and file other documents regarding the proposed transaction with
the SEC. This communication is not a substitute for any proxy
statement, registration statement, proxy statement/prospectus or
other document Rockwell Collins and/or B/E Aerospace may file with
the SEC in connection with the proposed transaction. INVESTORS AND
SECURITY HOLDERS ARE URGED TO READ CAREFULLY AND IN THEIR ENTIRETY
THE JOINT PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE, ANY
AMENDMENTS OR SUPPLEMENTS TO THE JOINT PROXY STATEMENT/PROSPECTUS,
AND OTHER DOCUMENTS FILED BY ROCKWELL COLLINS OR B/E AEROSPACE WITH
THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION, BECAUSE THESE
DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION. The Joint Proxy
Statement/Prospectus (when available) will be mailed to
stockholders of Rockwell Collins and B/E Aerospace. Investors and
security holders will be able to obtain free copies of Joint Proxy
Statement/Prospectus and other documents filed with the SEC by
Rockwell Collins and/or B/E Aerospace through the website
maintained by the SEC at www.sec.gov. Investors and security
holders will also be able to obtain free copies of the documents
filed by Rockwell Collins with the SEC on Rockwell Collins’
internet website at http://www.rockwellcollins.com or by contacting
Rockwell Collins’ Investor Relations at Rockwell Collins, 400
Collins Rd. NE, Cedar Rapids, IA 52498 or by calling (319)
295-7575. Investors and security holders will also be able to
obtain free copies of the documents filed by B/E Aerospace with the
SEC on B/E Aerospace’s internet website at
http://www.beaerospace.com or by contacting B/E Aerospace’s
Investor Relations at B/E Aerospace, Inc., 1400 Corporate Center
Way, Wellington, FL or by calling (561) 791-5000.
Participants in the Solicitation
Rockwell Collins, B/E Aerospace, their respective directors,
executive officers and other members of its management and
employees may be deemed to be participants in the solicitation of
proxies in connection with the proposed transaction. Information
regarding the persons who may, under the rules of the SEC, be
deemed participants in the solicitation of proxies in connection
with the proposed transaction, including a description of their
direct or indirect interests, by security holdings or otherwise,
will be set forth in the Joint Proxy Statement/Prospectus and other
relevant materials when it is filed with the SEC. Information
regarding the directors and executive officers of Rockwell Collins
is contained in Rockwell Collins’ proxy statement for its 2016
annual meeting of stockholders, filed with the SEC on December 16,
2015, and Rockwell Collins’ Current Report on Form 8-K filed with
the SEC on April 29, 2016. Information regarding the directors and
executive officers of B/E Aerospace is contained in B/E Aerospace’s
proxy statement for its 2016 annual meeting of stockholders, filed
with the SEC on April 28, 2016. These documents can be obtained
free of charge from the sources indicated above.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161023005021/en/
Rockwell CollinsInvestors:Ryan Miller,
319-295-7575investorrelations@rockwellcollins.comorMedia:David
Yeoman, 319-295-8987david.yeoman@rockwellcollins.comorPam
Tvrdy-Cleary, 319-295-0591pam.tvrdy@rockwellcollins.comorSard
Verbinnen & CoJim Barron/Jared Levy/Emily
Deissler212-687-8080orB/E Aerospace, Inc.Greg
Powell561-791-5000 ext. 1450
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