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Hexcel and Woodward to combine in all-stock merger
Posted on Monday, 13 January 2020 12:24
Woodward and Hexcel have announced plans to join forces in an all-stock transaction that will create a leading integrated systems provider serving the aerospace and industrial sectors with a combined market capitalisation of USD 13.71 billion.

Under the terms of the deal, the latter’s shareholders will receive a fixed exchange ratio of 0.63 scrips for each one currently held, with the former’s backers to continue to own the same number of securities in the combined company as they do prior to closing.

Based on Woodward’s last trading price of USD 121.96 on 10th January 2020, the offer can be calculated at around USD 76.83, which represents a premium of 5.4 per cent to Hexcel’s close of USD 72.91 on the same date, prior to the announcement.

The bid values the business at USD 6.48 billion.

Following completion of the transaction, expected in the third quarter of 2020, the shareholders in the two companies will own 55.0 per cent and 45.0 per cent of the combined business, respectively.

Together, they will be known as Woodward Hexcel and will rank among the top independent aerospace and defense suppliers globally by revenue.

It is expected to have more than 16,000 employees in 14 countries and a diversified customer base across multiple markets, with a combined pro forma 2019 earnings before interest, taxes, depreciation and amortisation (EBITDA) of USD 1.10 billion on revenue of USD 5.30 billion and an EBITDA margin of 21.0 per cent.

Woodward Hexcel will be focused on technology-rich innovations to deliver smarter, clearer and safer equipment to its clients.

Closing of the deal remains subject to shareholder and regulatory approvals and each company intends to separately announce their Q1 2020 and Q4 2019 financial results on 3rd February 2020.

The merger is likely to result in more than USD 125.00 million of annual cost savings, slated to be realised during the second full fiscal year post-closing, as well as enhanced revenue growth and consistently growing cash flows across program lifecycles.

Recent media reports picked up on the news, with Reuters suggesting the deal comes as suppliers to the aerospace industry have been struggling with the effects of the grounding and paused production of Boeing’s 737 MAX following the crashes of two separate flights.

Hexcel accounts 25.0 per cent of its annual sales from the plane manufacturer, while Woodward gets around 15.0 per cent from the same firm.

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