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Avcorp Industries has completed its acquisition of the assets and certain liabilities of the composite Aerostructures division of SGL Carbon SE’s (SGL’s) subsidiary, Hitco Carbon Composites.
According to Avcorp, the acquisition, which was first announced in July 2015, will approximately double its revenue while strengthening its balance sheet. This acquisition will also significantly expand Avcorp’s carbon composite manufacturing capabilities and result in the Company receiving cash, payment commitments and supplies valued at approximately $65 million. All amounts are in Canadian currency.
“The acquisition of the assets and certain liabilities of Hitco’s Aerostructures division represents one of our most significant milestones to date and is strategic on a number of levels,” said Pete George, Avcorp Group’s CEO. “Without incurring any debt or diluting shareholders through the issuance of new shares, we have significantly strengthened our ability to address the growing market for composite airframe structures in the aviation sector. More importantly, we have strengthened our position within the supply chains of our most important customers. We have witnessed first-hand how the aerospace industry leaders are taking advantage of the benefits that carbon composites provide, including reducing aviation fuel costs, reducing the number of component parts and increasing design flexibility.”
Mr. George also said, “Adding Hitco’s Aerostructures division’s manufacturing facilities to our operations will be immediately accretive to our financial performance, essentially almost doubling our revenue to a range of approximately $165 million to $175 million on a pro forma annualised basis. With expected operational efficiencies and improved utilisation of our existing facilities in Delta and Burlington, the transaction will accelerate our expected return to profitability.”
Transaction highlights according to Avcorp:
Avcorp will receive approximately $58 million in cash and payment commitments from SGL, the parent company of Hitco;
Avcorp will also receive in kind supplies and/or payments totaling up to $7 million through December 31, 2016;
Supplementing the cash and in kind payments received, Avcorp will assume approximately $41 million of working capital, adding to the positive liquidity of the transaction;
Equipment received as a component of the acquisition transaction has an estimated fair market value of $54 million;
Hitco’s production is expected to contribute $93 million in new revenue for Avcorp on an annual basis, while the Hitco Aerostructures division has been operating at a loss;
Avcorp will continue to operate Hitco’s Aerostructures division facilities from its current location in Gardena, California, transitioning to the new name of Avcorp Composite Fabrication (ACF);
Avcorp will strengthen its leadership talent through the addition of key members of management and will retain the majority of Hitco’s Aerostructures Division existing employees;
Hitco’s Aerostructures division, which is an AS9100C certified manufacturer, includes Lockheed Martin, Fuji Heavy Industries, Northrop Grumman, Alenia Aeronautica, Spirit AeroSystems, Pratt & Whitney Canada and The Boeing Company among its largest customers; and
The transaction has received all relevant regulatory and third-party approvals.
Mr. George added, “Our experience in successfully integrating our Comtek facilities in Burlington following its acquisition will serve as a model with the Avcorp Composite Fabrication facilities. The transition of Comtek to successful consecutive years of profitable growth is our expectation for Avcorp Composite Fabrication in Gardena. We look forward to introducing ACF’s capabilities to existing Avcorp customers and also providing the quality and performance levels that Hitco Aerostructures Division’s existing customers expect.”
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