AAR CORP. has entered into a definitive agreement with Triumph Group to purchase Triumph Product Support for US$725 million in cash. As part of the transaction, AAR expects to receive estimated tax benefits with a present value of approximately US$80 million. Including the estimated tax benefits, the effective purchase price multiple is expected to be 11.7x FY2024 EBITDA and 9.9x including estimated run-rate synergies of US$10 million.
Triumph Product Support is a leading global provider of specialised maintenance, repair, and overhaul capabilities for critical aircraft components in the commercial and defence markets. The company provides MRO services for structural components, engine and airframe accessories, interior refurbishment and wheels and brakes. Additionally, Triumph Product Support designs proprietary designated engineering representative (DER) repairs and parts manufacturer approval (PMA) parts.
Triumph Product Support services both the commercial and military aftermarkets across five primary locations, has a highly skilled workforce of over 700 employees. The business is projected to generate approximately US$280 million of revenue and US$55 million of EBITDA, representing an EBITDA margin of 20%, in its fiscal year ending March 31, 2024.
AAR's acquisition of Triumph Product Support is supported by a fully committed bridge facility. AAR intends for permanent financing to include a mix of debt and equity to maintain a strong balance sheet to support future growth. AAR will target pro forma net leverage to be approximately 3.0x at closing, inclusive of a potential equity issuance subject to market conditions. After closing, we expect strong combined free cash flow to enable further deleveraging.
The transaction is expected to close in the first quarter of the 2024 calendar year, subject to customary closing conditions, including receipt of certain regulatory approvals.
