Precision Castparts Corp. (PCP) intends to acquire Klune Industries, a manufacturer of complex aluminum, nickel, titanium and steel aerostructures. The all-cash acquisition is expected to be accretive to earnings immediately. The transaction is expected to be completed by the second quarter of fiscal 2013, subject to regulatory approval. After the completion of the deal, Klune will become a part of Precision's Fastener's products segment.
The acquisition of Klune may be considered a strategic move by Precision, as the companies complement each other in several ways. Klune not only provides product and operational synergies, but the location of its facilities also indicates geographical synergies.
Klune's sheet metal and fabrication capabilities are expected to be a perfect addition to Precision's existing aerostructures product offerings. Earlier, Precision used to buy castings, forgings and fasteners, but now after its acquisitions of Centra, Primus and Klune, these can be supplied internally. Additionally, their expertise in machining castings adds to the company's own aerostructures manufacturing capabilities.
After experiencing high volatility in the recent past, the global aerospace industry is beginning to look up. Elevating global demand for airline travel, continued production of Dreamliner (787) and A320 by Boeing and Airbus respectively, are expected to drive the global aerospace demand from 2013 through 2015.
Therefore, with this trend in mind, leading aerospace manufacturers are opting for strategic acquisitions to gain cost synergies and benefit from this forthcoming demand. In, the recent past, United Technologies (UTX), the leading manufacturer of aerospace products and the world's leading supplier of aircraft engines acquired Goodrich Corporation for $18.4 billion. Goodrich is a global supplier of systems and services to the aerospace and defense industry with estimated 2011 sales of $8 billion. Its products include aircraft landing gear, aircraft wheels and brakes.
From a top-line perspective, Klune's product line is expected to significantly increase Precision's dollar content on the Boeing (BA) 787. In addition, Klune also has solid positions on other major aircraft platforms, such as the Boeing 737 and Gulfstream G650.
Klune primarily focuses on complex forming, machining, and assembly of aerostructures parts, apart from offering significant expertise in a range of cold-formed sheet metal components.
Precision Castparts Corp. is a diversified manufacturer of complex metal components and products. It serves the aerospace, power and general industrial markets. PCC is the market leader in manufacturing large, complex structural investment castings, airfoil castings, forged components, and highly engineered, critical fasteners for aerospace applications.
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