Woodward, Hexcel attempt to become a force in aerospace

The companies say the merger will allow them to create more efficient aircraft that will reduce emissions.

By Michelle Chapman / Associated Press

Woodward and Hexcel are merging in an all-stock deal that would create one of the largest suppliers in the aerospace and defense industry.

The companies say the tie-up will allow them to create more efficient aircraft that will reduce emissions, a big hurdle for the aerospace industry.

“The future of flight and energy efficiency will be defined by next-generation platforms delivering lower cost of ownership, reduced emissions, and enhanced safety — and a combined Hexcel and Woodward will be at the forefront of this evolution,” Hexcel CEO Nick Stanage said in a prepared statement.

Hexcel’s stock jumped 9.6% at the opening bell Monday. Shares of Woodward rose 5.1%.

The new company, called Woodward Hexcel, will generate more than $5 billion in annual sales with a market capitalization nearing $14 billion and more than 16,000 employees.

Woodward Hexcel will have manufacturing operations in 14 countries on five continents, including facilities in Skagit and King counties.

Both companies supply Airbus and Boeing, including parts for the 737 Max. With Boeing ensnared in one if its biggest crisis following the crash of two of its marquee aircraft, industry analysts speculate the deal may have been pushed forward to better position the combined company with Airbus.

“With Airbus’ share of the commercial aerospace market likely to gradually rise, Woodward believes Hexcel’s strong European sales force and Airbus market position should help it rapidly expand its market position,” analyst Nicholas Heymann of William Blair wrote.

Hexcel shareholders will receive a fixed exchange ratio of 0.625 shares of Woodward Inc. common stock for each share of Hexcel Corp. stock that they own. Woodward shareholders will continue to own the same number of shares in the combined company as they do immediately prior to the closing.

Existing Woodward shareholders will own about 55% of the combined company, with Hexcel shareholders owing about 45%.

Stanage will serve as CEO of the combined company. Woodward President, Chairman and CEO Tom Gendron will serve as executive chairman of the combined company until the first anniversary of the merger’s closing. At that time Gendron plans to retire and will then serve as non-executive chairman of the combined company until the second anniversary of the merger’s closing. At that point, Stanage will take on the additional role of chairman.

The combined company’s board will have 10 members, consisting of five directors from each company, including Gendron and Stanage.

The combined business will be based in Fort Collins, Colorado, where Woodward has its headquarters. Hexcel is based in Stamford, Connecticut.

The deal is expected to close in the third quarter. It still needs approval from the shareholders of both companies, as well as regulatory approvals.

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