Rockwell Collins’ acquisition of B/E Aerospace gets EC clearance

Under the EU Merger Regulations, the European Commission has given the go-ahead to the acquisition of B/E Aerospace by Rockwell Collins. The Commission decided that a merger of the two U.S. companies would not raise any concerns over competition as there were no overlaps or vertical links between the two companies’ products, nor would their combined products shut out competitors to the market.
Rockwell Collins is a provider of avionics and cabin electronics products and solutions for commercial and government application aircrafts, while B/E Aerospace is a supplier of aircraft cabin interior products such as cabin seats, lighting and oxygen systems, and food and beverage preparation and storage equipment.
The intended acquisition of B/E Aerospace was announced at the end of October, 2016, for an agreed figure of US$6.4 billion plus the assumption of US$1.9 billion in debt. The acquisition will allow both companies to sell to each other’s customers while also enabling the deployment of Rockwell’s capability with onboard connectivity to make internet-enabled seats, galleys, lavatories and other cabin systems that B/E Aerospace provides.
At the time of the announced deal, Rockwell Chief Executive Officer, Kelly Ortberg, stated: “B/E is very strong in relationships with airlines. We’re stronger with aircraft makers as well as business aviation operators and the military. We’ll be able to sell our respective products into a much broader market base than either of us could do independently,” indicating that cost savings will come from eliminating public company administration at B/E Aerospace, greater buying power with suppliers, consolidating information technology system and using low-cost factory labor across the combined company
The combination has the potential to create cost savings of about US$160 million, with 90% captured in the first full year of the acquisition, while also providing a double-digit percentage boost to per-share earnings in the first full year. The two companies also aim to generate more than US$6.0 billion in free cash flow over five years.