LMI Aerospace (LMIA) to Acquire Valent Aerostructures in $246.7M Deal

December 6, 2012 7:01 AM EST
LMI Aerospace, Inc. (Nasdaq: LMIA) has agreed to acquire Valent Aerostructures, LLC ("Valent") for approximately $237 million, plus approximately $9.7 million of certain retained obligations.

Headquartered in Kansas City, Missouri, Valent is a leading provider of complex, structural components, major sub-assemblies and machined parts for OEM and Tier 1 airframe manufacturers in the aerospace and defense industries. The company is well-positioned providing significant content for several major commercial, business jet and military platforms, including the Boeing 737, 747-8, 777, 787, V-22 and Gulfstream G650. Like LMI, Valent has established a reputation as a highly regarded supplier, evidenced by recent awards. The Boeing Company has previously awarded Supplier of the Year to both companies. In 2011, Valent won a Spirit AeroSystems Platinum Supplier Award and Aviation Partners Boeing awarded Supplier of the Year to LMI.

Assuming the transaction closes in 2012, LMI is expected to generate over $480 million of revenues based on projected 2013 results of the combined entities. The increased scale, complementary product offerings and enhanced project management capabilities of the consolidated company are expected to drive further growth from existing platforms as well as launch differentiated solutions for key aerospace platforms. The combined companies are expected to deliver significant benefits to customers, employees and shareholders through more diversified product and services offerings, deeper customer relationships and greater leverage of its extensive manufacturing and supply chain network.

The transaction, unanimously approved by LMI's Board of Directors, is subject to various closing conditions, including regulatory approvals, and is expected to be completed by December 31, 2012. The purchase consideration payable to Valent's equity holders at closing would be approximately $237 million, less retained indebtedness of approximately $12.6 million and would include $15 million of LMI stock. The aggregate consideration of approximately $246.7 million with respect to the transaction, which includes the retained obligations of $9.7 million and retained indebtedness of $12.6 million, represents approximately 8.6 times projected 2013 EBITDA, pre-synergies, after adjusting for the estimated $35 million of tax benefits created by LMI's acquisition of Valent. The purchase agreement also includes a potential earnout of up to $40 million in the event Valent surpasses certain EBITDA thresholds in 2013.

LMI has entered into a commitment letter with RBC Capital Markets to provide $300 million of new senior secured credit facilities to finance the Valent acquisition, refinance existing debt and fund working capital requirements. The new senior credit facilities would replace LMI's existing senior credit facility. LMI expects slight dilution in 2013 EPS as a result of the acquisition, but anticipates the Valent acquisition to be highly accretive to EPS in 2014.

Advisors to LMI on the transaction are: RBC Capital Markets, exclusive financial advisor; Polsinelli Shughart PC, legal advisor; and AeroAdvisory, LLC, strategic deal planning and due diligence advisor. Advisors to Valent are: Wells Fargo Securities, financial advisor and SNR Denton, legal advisor.

Assuming a closing by December 31, 2012, LMI plans to provide updated guidance for 2013 reflecting the Valent acquisition in conjunction with the release of LMI's 2012 annual financial results.

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