Esterline Corp. [ESL] recently said it has acquired Eclipse Electronic Systems, a designer and producer of lightweight receivers used in signals and communications intelligence in manned and unmanned aircraft, for $120 million in cash.
The deal expands Esterline’s existing foothold in the arena for airborne secure communications and will allow it to better serve its base of prime defense contractors with improved capabilities and product mix, Brad Lawrence, Esterline’s CEO, said on analyst call on Monday to discuss the acquisition.
Esterline said the acquisition would be modestly accretive to earnings in the first year and improve its returns afterward once initial integration-related costs are out of the way, mainly helping Eclipse move to a larger facility to support its rapid growth. Company officials declined to give specifics about Eclipse’s financials but did say that the purchase price is about 10 times earnings before interest, taxes, depreciation and amortization.
Lawrence did say that Eclipse’s annual growth rate is in the high double-digits, although he pointed out that the acquisition is relatively small. The company is “early in its growth curve and transitioning to a much larger enterprise,” he said.
Esterline is currently in the first quarter of its FY ’11. The company expects earnings per share this year between $4.40 and $4.65, essentially even on the high-end of guidance with FY ’10. Sales are expected to be up between 5 and 8 percent from $1.5 billion in FY ’10. The Eclipse acquisition was already factored into guidance.
Lawrence said that the acquisition also better positions Esterline in the rapidly growing intelligence, surveillance and reconnaissance (ISR) area, particularly for signals intelligence.
The market for airborne ISR is growing both internationally and in the United States, Stephen Larson, Esterline’s vice president of Strategy and Technology, said during the call. ISR doesn’t just support operations, anymore it is the operation, he said.
Eclipse’s main product is a lightweight, powerful radio frequency radio receiver that it has sold primarily to original equipment manufactures. The company has an installed base of over 3,000 of the components, which are on most manned ISR aircraft. The company’s products are also installed on the Northrop Grumman [NOC]- built Global Hawk and General Atomics-built Predator and Reaper unmanned aircraft systems.
Eclipse also sells products directly to defense agencies and the intelligence community.
Lawrence said that Esterline believes that Eclipse’s products can also be adapted to the tactical market for lightweight powerful communications. The company’s products are based on open architecture, making them adaptable for a lot of platforms, he said.
Esterline provides Eclipse with more access to working capital and more sales and marketing resources, Lawrence said.
Eclipse, which is based in Texas, has 130 employees. Esterline said that it is also getting Eclipse’s “brain power,” in the deal, as well as its founder and CEO Jeff Sanders, who will continue to run the company.
Esterline acquired Eclipse through an auction process.