B/E Aerospace has commenced a process to separate its businesses into two independent, publicly traded companies. One company will focus on the design, development, manufacturing, certification and direct sales of aircraft cabin interior equipment on a global basis, while the other will focus on distribution, logistics and technical services for the aerospace and energy services markets.
According to the company, this separation announcement represents an important step in its ongoing strategic review process, and B/E’s board of directors and management are continuing to review and aggressively pursue strategic alternatives to enhance value to shareholders. “Each of the new companies will be a global leader in its respective market. B/E has positioned both businesses to be successful, profitable and sustainable independent companies, and this decision reflects a further evolution of the company’s strategies emphasising the development of the company’s businesses, addressing their distinct needs and thereby increasing their value to shareholders,” said the company in a statement.
Amin Khoury, chairman and co-CEO of B/E Aerospace stated: “Separating these highly successful businesses into two industry-leading companies will allow each to benefit from increased management focus and operational flexibility, as well as allow the management teams and boards of directors of each business to determine the optimal capital structure, free cash flow allocation policy, growth strategy, compensation system and performance measurement metrics. This decision reflects B/E’s ongoing commitment to optimise the distinct needs of each of our businesses and the company’s strategic priorities, consistent with our focus on driving shareholder value.”
Subject to further financial, tax and legal analysis, B/E currently plans to separate the businesses by way of a tax-free distribution to its shareholders, which would result in shareholders of the company holding shares in two independent and publicly traded companies.
The aircraft cabin interior equipment design, development, manufacturing, certification and direct sales business, which will include the company’s commercial aerospace and business jet segments (now called B/E Aerospace Manufacturing Co.), is a world-leading global manufacturer of aircraft cabin interior products for both commercial airliners and business jets, including a broad range of seating products with a wide variety of comfort and entertainment features, food and beverage preparation and storage equipment, lighting systems, oxygen systems, modular lavatory systems and galley systems which are each complemented with sophisticated R&D, engineering services, programme management and certification services. Manufacturing Co. had revenues of approximately US$2.5bn and EBITDA of approximately US$510m, representing 20.4% of revenues, for the trailing 12 months ending March 31, 2014.
B/E Aerospace Services Co. is a leading distributor and value-added service provider of aerospace fasteners, consumables and logistics services to the airline and aerospace industries. This business offers a broad range of aerospace hardware and consumables and inventory management services worldwide and serves as a distributor for every major aerospace fastener manufacturer, offering services which include inventory management and replenishment, creative and differential supply chain solutions, special packaging and bar-coding, sophisticated parts kitting, quality assurance testing and a wide variety of purchasing assistance programmes, plus the latest in electronic data interchange capability. On a pro-forma basis, Services Co. had revenues of approximately US$1.6bn and EBITDA (excluding transaction expenses) of approximately US$365m, representing 22.8% of revenues, for the trailing 12 months ending March 31, 2014, as adjusted for all recent acquisitions as if they had been made as of January 1, 2013.
“Each of our businesses, Manufacturing Co. and Services Co., is already an industry leader, and by leveraging the benefits which we believe will result from allowing these businesses to independently pursue more focused, targeted strategies, each will be well-positioned to generate even greater value to both our customers and our shareholders,” Khoury added.
B/E believes that creating two public companies offers a number of benefits to address the individual needs of each of our businesses, including:
• Intensify focus on its distinct operational priorities
• Provide the opportunity for separate management teams to focus on each distinct business
• Allow flexibility for each business to pursue the most appropriate growth and investment strategies
• Determine the most appropriate compensation system and performance measurement metrics
• Pursue the optimal capital structure and free cash flow allocation policies
B/E plans to provide further details about the specific composition of the boards of directors and management teams of each of the separate companies at a later date.
