ST Engineering unit to acquire GE's aircraft part manufacturer for US$630m

MAINBOARD-listed Singapore Technologies Engineering (ST Engineering) has agreed to acquire General Electric's MRA Systems, LLC (MRAS) in a deal that values the company at some US$630 million, the group announced on Thursday evening after market close. 

ST Engineering's US subsidiary, Vision Technologies Aerospace, entered into the agreement on a "cash-free, debt-free basis", subject to closing adjustments for underfunded pension obligations, and other debt-like items. 

Based in Baltimore, Maryland, US, MRAS is a manufacturer of engine nacelle systems. An engine nacelle is the casing that houses an aircraft engine, providing efficient aerodynamics during flight and thrust reversal capabilities.

The base purchase price of US$630 million for the deal translates into a multiple of 10 times MRAS's earnings before interest, tax, depreciation and amortisation (Ebitda), and 1.2 times MRAS's revenue for the 12-month period ended June 30, 2018.

After factoring in closing adjustments, the consideration for the proposed acquisition is estimated to be US$440 million. This will be funded by internal cash and external borrowings, and be fully paid in cash upon completion of the deal, ST Engineering said. 

For the half-year ended June 30, MRAS's net profit stood at US$24.1 million. 

The proposed acquisition is expected to be earnings accretive for the group and its aerospace sector, the group said. 

As a single-source nacelles provider for the Airbus A320neo in partnership with Safran Nacelles, MRAS is in a strong position to benefit from A320neo fleet growth, which has 57 per cent of the current narrow-body aircraft orders, ST Engineering added. 

Said president and CEO of ST Engineering, Vincent Chong: "ST Engineering keeps a constant lookout to acquire companies in our core business areas or adjacencies that will contribute profitable revenue streams and sharpen our competitive edge. We are excited by the prospects of our investment in MRAS, which is a high-value and complementary business that will enhance our scale, global reach and capture synergies for the group."

Subject to regulatory approvals, the deal is expected to be completed by the end of the first quarter next year. 

Shares in ST Engineering closed at S$3.29 apiece on Thursday, up 0.3 per cent, or one Singapore cent before this announcement.