B/E Aerospace to be sold to Rockwell Collins

CEDAR RAPIDS, Iowa. B/E Aerospace and Rockwell Collins representatives 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, for $8.3 billion in total consideration.

Officials explain, the transaction combines ’ capabilities in flight deck , cabin , mission communications, , and information management systems with 's range of cabin interior products that will include seating, lighting and oxygen systems, and modular galley, and lavatory systems for commercial airliners and business jets.

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).

Upon completion of the transaction - expected in Spring 2017 - current B/E Aerospace shareowners will own approximately 20 percent of the combined company. Rockwell Collins officials expect to finance the cash portion of the transaction with debt financing and when the transaction is complete, the company 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 also 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 is expected to generate run-rate pre-tax cost synergies of approximately $125 million after tax. Kelly Ortberg, Chairman, President and Chief Executive Officer of Rockwell Collins, says, “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.”

Ortberg adds, “We see tremendous opportunity to better serve our commercial aviation, business jet, and military customers through broader offerings.”

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.”

The transaction is subject to the approval of Rockwell Collins and B/E Aerospace shareowners, regulatory approvals, and other customary conditions. Once the transaction is closed, Rockwell Collins will add two B/E Aerospace board members and increase their Board to 11 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. 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.