Astronics [ATRO] on Tuesday said it has agreed to acquire the Test and Services (T&S) division of Airbus Group’s North America business for $53 million in cash, expanding its capabilities in the testing business and providing access to new markets.
The deal is expected to close in February and is subject to government approval.
The Airbus T&S business, which consists primarily of the acquisitions of Racal Instruments in 2004 and Talon Instruments in 2005, had sales of about $70 million in 2013 with expectations of about $100 million this year, Astronics said.
The T&S business of Airbus provides automatic test systems, subsystems and instruments for the semiconductor, consumer electronics, commercial aerospace and defense industries. More than half of the business was commercial in 2013 and that trend is expected to continue in 2015.
The T&S business has proven its ability to diversify into new markets, which is important given the lull in defense spending, Peter Gundermann, CEO of Astronics, said Tuesday on a conference call to discuss the pending acquisition. There is strong long-term potential in the test market despite recent difficulties, he said, adding that commercial aerospace represents just 10 to 15 percent of the business and is an area with strong growth potential.
Gundermann said that Astronics is good at the software side of the test business, the test program sets of automated tests, whereas the T&S business is stronger on the hardware side and automation side. Through the combination “we believe we can create a more formidable and a more capable competitor,” he said.
Astronics and T&S have already teamed to pursue business opportunities, Gundermann said.
Gundermann also said that the T&S business fits will with Astronics’ core capabilities in that it is technical and provides customized solutions for customers. Customers include large aerospace and defense companies like Boeing [BA], Britain’s BAE Systems, Lockheed Martin [LMT], Northrop Grumman [NOC], Rockwell Collins [COL], Honeywell [HON], France’s Thales, and United Technologies Corp. [UTX].
Astronics said the deal also includes a $10 million working capital adjustment. The California-based T&S business has 210 employees.
Airbus Group’s financial adviser on the deal was Houlihan Lokey.
Europe-based Airbus Group said that the sale of T&S is part of its effort to focus on its core businesses as it reorganizes. Airbus Group changed its name at the beginning of this year from the European Aeronautic Defence and Space Co.