Albany International to acquire Harris aerostructures business

Aerospace composites fabricator Albany International will acquire the Salt Lake City, UT, US, operations of Harris for $200 million.

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Aerospace composites manufacturer Albany International Corp. (Rochester, NH, US) reported on Feb. 29 that it has agreed to acquire Harris Corp.'s composite aerostructures division in Salt Lake City, UT, US, for total consideration of $210 million, including the assumption of a $23 million capital lease. Harris had acquired the Division through its 2015 acquisition of Exelis Inc.

The Harris division is a leading supplier of advanced composite products primarily for airframe applications. It has significant positions on three major growth platforms: Lockheed’s F-35 Lightning II, Boeing’s 787 and Sikorsky’s CH-53K. It also supplies the vacuum waste tanks for most of Boeing’s 7-Series aircraft, and components of the airframe of a Lockheed Martin family of air-to-surface missiles; and it has small positions on the airframes of the Airbus A350 and A380, and on GEnx engines.

Albany says it views the Harris division as an attractive standalone growth platform. Nonetheless, the two companies have what Albany says are "highly complementary capabilities," and Albany's primary motivation for entering into this transaction is the additional long-term growth potential created by their combination.

Joe Morone, president and CEO of Albany International, says, “The combination of AEC and this aerostructures division creates a major force in aerospace composites, which should be able to realize significant new long-term growth opportunities, in addition to the already substantial growth that each business is poised to achieve over the next five years. While we believe this acquisition would have been justifiable on a standalone basis given the division’s growth potential, and while we are confident that AEC and the division each have the capability to realize their respective growth potential on their own, we see compelling and multiple forms of complementarity, all of which point to opportunity for additional growth late this decade and into next decade.”

The acquisition is projected to be slightly accretive to Albany earnings in 2016, with projected 2016 sales in the $80 million-$90 million range, and adjusted EBITDA in the $13 million-$15 million range. Sales and adjusted EBITDA are expected to rise sharply through early next decade with the anticipated ramp-up of the F-35, 787, and CH-53K programs. Assuming good execution and no significant slippage in program schedules, sales are projected to exceed $200 million by 2020, and adjusted EBITDA margins could approach 20% by 2020. Subject to these same assumptions, the Albany's estimated return on invested capital for the acquisition is projected to exceed Albany’s current cost of capital by 2018 and reach double-digits by 2020.The transaction, which is conditional on regulatory and other customary conditions, is expected to be completed by the end of the first quarter or early second quarter of 2016. 

Click here for a report on Albany's composites operations. Click here for a report on Harris' (formerly Exelis) aerostructures operations.

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