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Albany International to acquire advanced composites business

News International-French

29 Feb 2016

Albany International Corp. has agreed to acquire Harris Corporation’s composite aero-structures division 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 Division is a supplier of advanced composite products primarily for airframe applications. It has positions on three major growth platforms: Lockheed’s Joint Strike Fighter (JSF), 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 380, and on GEnx engines.

The acquisition is projected to be slightly accretive to Albany earnings in 2016, with projected 2016 sales in the $80 million to $90 million range and Adjusted EBITDA in the $13 million to $15 million range. Sales and Adjusted EBITDA are expected to rise sharply through early next decade with the anticipated ramp-up of the JSF, 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 Company’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 company views the division as an attractive stand-alone growth platform. Nonetheless, AEC and the division have complementary capabilities, and the company’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, commented, “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 stand-alone 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.”

Albany will use existing cash on hand and its revolving credit facility to finance the transaction. In connection with the transaction, Albany expects to create additional borrowing capacity by increasing its existing revolving credit facility from $400 million to $550 million prior to the closing of the transaction; terms of the new credit facility are expected to be similar to the terms of the current facility.

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.

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