CHICAGO – Boeing Co. announced its biggest acquisition Monday in nearly a decade, agreeing to acquire aviation parts and services company Aviall Inc. for $1.7 billion in cash in a deal aimed at increasing its already large stakes in commercial and military aviation markets.
The transaction was the first under Chairman and CEO Jim McNerney and was announced shortly before the company’s annual shareholders meeting.
“The aviation services market offers us tremendous opportunities to profitably grow our business, internally and externally, to better serve our commercial and military customers,” McNerney said in a statement.
If the deal is approved by regulators, Aviall will become a wholly-owned subsidiary reporting to Boeing’s commercial aviation services unit. Aviall is based in Dallas and has about 1,000 employees.
Boeing agreed to pay $48 a share for Aviall, a 27.3 percent premium to Aviall’s closing price of $37.70 on Friday. It also will assume $350 million in debt.
Aviall’s shares leaped $9.30 or 24.7 percent, to $47 in morning trading on the New York Stock Exchange, while Boeing shares rose 8 cents to $83.53, one week after hitting an all-time high of $87.25.
Boeing said the acquisition, which is anticipated to close by the end of the third quarter, is expected to boost earnings modestly in 2007 and have no effect this year.
Aviall’s businesses include global parts distribution and supply chain services for aerospace, defense and marine industries worldwide. Its 2005 revenue totaled $1.3 billion, and Boeing said it expects 25 percent growth in 2006.
Aerospace analyst Paul Nisbet of JSA Research said the deal “makes eminent sense” for Boeing, and with little evident risk.
“It’s something that, with Boeing’s economic power could be expanded very considerably,” he said. “They’re looking at a $25 billion market and they figure they can probably get a good quarter of that, so you could be adding something on the order of $6 billion in business – and good-margin business.”
Boeing had $54.8 billion in revenues in 2005 and was expecting that total to grow to $60 billion this year, before the Aviall deal was announced. The company has ridden the momentum of its commercial airplane business to a strong start to 2006, announcing 29 percent higher first-quarter profits last week.
Aviall chairman and CEO Paul Fulchino said his firm is delighted at becoming a Boeing subsidiary. “We will now be able to bring our groundbreaking efforts to a much wider aerospace supply chain,” he said.
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