Tuesday, March 23, 2010

A Triumph for Triumph (TGI)



No, not that Triumph.

Wayne Pennsylvania Aerospace firm Triumph Group announced a game-changing acquisition this morning. They will buy Vought Aircraft Industries of Dallas for $1.44billion in cash and stock.

Note that the deal will boost earnings by a dollar per share, or about 20%:
WAYNE, Pa.--(BUSINESS WIRE)--Triumph Group, Inc. (NYSE:TGI) today announced the signing of a definitive agreement to purchase Vought Aircraft Industries, Inc. from The Carlyle Group for cash and stock consideration of $1.44 billion including the retirement of Vought debt, creating a company with industry-leading breadth of product and capabilities. The purchase consideration to Vought shareholders includes approximately 7.5 million shares and $525 million of cash. Post-closing, Carlyle will own approximately 31% of the outstanding stock of Triumph and will be subject to certain lock up provisions. The transaction is subject to customary closing conditions including regulatory approvals and approval of Triumph shareholders and is expected to be completed in July, 2010. The acquired business will operate as Triumph Aerostructures -Vought Aircraft Division, LLC. On a full-year run-rate basis, earnings accretion is expected to be in excess of $1.00 per diluted share, reflecting initial estimates of purchase accounting adjustments and excluding synergies resulting from the acquisition and transaction-related expenses.
Importantly, the revenue stream being acquired here seems to be steady, although I wonder if the firm will take part in any new Boeing 787 work:

Vought, based in Dallas, Texas, is a leading global manufacturer of aerostructures for commercial, military and business jet aircraft with sales of $1.9 billion in 2009. Products include fuselages, wings, empennages, nacelles and helicopter cabins. Vought’s customer base is comprised of the leading global aerospace original equipment manufacturers and over 80% of their revenue is from sole source, long-term contracts. Major platforms include the Boeing 747-8, Boeing 767, Boeing 777, Airbus A330/340, Boeing C-17, Boeing V-22, Northrop Grumman Global Hawk and Gulfstream G450 and G550.

The $1.9billion Vought did in 2009 sales is well above the $1.3billion expected for Triumph in its fiscal year ended May, so this deal is truly transformational. According to the press release, the combined company would have about $446million in EBITDA, and I estimate $324 of that would be from the newly acquired business, for a very reasonable EV/EBITDA purchase price of 4.3 -- cheers to Triumph!




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