8-KRegulation FDExhibits & Filings

TransDigm Group INC 8-K Report, Regulation FD Disclosure (Sep 6, 2016)

Filed September 6, 2016For Securities:TDG

Summary

TransDigm Group Inc. (TDG) announced on September 6, 2016, its definitive agreement to acquire Young & Franklin Inc. and its subsidiary Tactair Fluid Controls Inc. for a cash purchase price of $260 million. This acquisition is expected to generate approximately $73 million in tax benefits for TransDigm over 15 years, effectively reducing the net acquisition cost. The company plans to finance the deal using its existing cash reserves, indicating a strong liquidity position. The acquired business, Young & Franklin/Tactair, is a manufacturer of proprietary valves and actuators, with projected revenues of $75 million for fiscal year 2016. A significant portion of this revenue, around 70%, is expected to come from the aftermarket, a characteristic that aligns well with TransDigm's business model focused on stable, recurring revenue streams. The proprietary nature of nearly 100% of its products and its aerospace focus further enhance its strategic fit within TransDigm's portfolio.

Key Highlights

  • 1TransDigm to acquire Young & Franklin Inc. and Tactair Fluid Controls Inc. for $260 million in cash.
  • 2Acquisition is expected to yield approximately $73 million in tax benefits over 15 years.
  • 3TransDigm plans to fund the acquisition using existing cash on hand, demonstrating financial flexibility.
  • 4The acquired company generates approximately $75 million in annual revenue, with 70% from aftermarket sales.
  • 5Nearly all (100%) of the acquired company's revenues are from proprietary products.
  • 6The acquisition is expected to close in the fourth quarter of fiscal year 2016, subject to customary conditions.

Frequently Asked Questions

The acquisition aligns with TransDigm's strategy of acquiring businesses with proprietary products, significant aftermarket content, and strong aftermarket potential. Young & Franklin/Tactair manufactures proprietary valves and actuators, with a substantial portion of revenue (70%) derived from the aftermarket, which typically offers higher margins and greater stability.

TransDigm intends to finance the $260 million cash purchase price using its existing cash on hand. This suggests the company has ample liquidity and does not need to resort to debt financing or equity issuance for this transaction.

The acquisition is expected to add approximately $75 million in annual revenue, with a strong emphasis on aftermarket sales. Furthermore, TransDigm anticipates realizing significant tax benefits of around $73 million over 15 years, effectively reducing the net cost of the acquisition. The proprietary nature of the products should contribute to stable revenue and profitability.

The transaction is subject to regulatory approvals and other customary closing conditions, with an expected closing date in the fourth quarter of TransDigm's fiscal year 2016.