Thursday, August 27, 2009

Precision Castparts up on accretive acquisition (PCP)

AlphaNinja - Precision Castparts (PCP) appears to have made a nice acquisition that will immediately add to earnings:

PORTLAND, Ore., Aug. 26, 2009 (GLOBE NEWSWIRE) -- Precision Castparts Corp. (NYSE:PCP - News) has agreed to acquire Carlton Forge Works (Carlton) and related entities for $850 million.

"Carlton is a critical strategic asset that we have aggressively pursued for several years," said Mark Donegan, chairman and chief executive officer of Precision Castparts Corp. "Ring rolling has been a distinct gap in our product portfolio, and Carlton, the technology leader in that market, will enable us to provide a full range of products to our engine customers. Carlton has also been very successful in building its market positions on all major programs currently in development, including the Boeing 787 and Airbus XWB.

"Carlton significantly broadens our forging capabilities, and, with our combined strengths, we can attack markets that we haven't been able to penetrate individually," Donegan continued. "Our Wyman-Gordon forging operations will share best practices with Carlton, and we can bring Special Metals' and Caledonian's strengths to bear in significantly reducing Carlton's material cost structure. In addition, with seven other PCC manufacturing operations in southern California, we will be able to leverage our growing economies of scale in that region."

PCP did not disclose details of Carlton's profitability. According to Wikipedia the company has 250-300 employees, so PCP paid roughly $3.09million per employee. PCP's own market value is $13billion or about $640k per employee, so we'd better hope there's some high margins at this business! (Note - I am skeptical about these figures, so maybe the employee number is off)

AmTech Research raised its price target for PCP to $105 from $74. I like the deal too, but increasing the price target 42% on a deal of this size seems a bit excessive...

No comments:

Post a Comment