Loar Holdings Inc. Announces Acquisition of Applied Avionics, Inc.

Rhea-AI Summary

Loar Holdings Inc (NYSE:LOAR) has announced a definitive agreement to acquire Applied Avionics, Inc. for $385 million in cash. Applied Avionics, founded in 1968, specializes in designing and manufacturing highly engineered avionics interface solutions. The company's brands, VIVISUN® and NEXSYS®, are preferred by leading aircraft retrofit providers and military contractors. Applied Avionics is expected to generate approximately $40 million in sales and $21 million in adjusted EBITDA for 2024. Loar anticipates tax benefits of about $45 million from the transaction, resulting in an effective purchase price multiple of 16x Applied Avionics' 2024 adjusted EBITDA. The acquisition aligns with Loar's strategy to enhance its niche capabilities and proprietary product offerings, with over 75% of Applied Avionics' sales coming from the aftermarket.

Positive

• Acquisition of Applied Avionics for $385 million adds highly engineered avionics interface solutions to Loar's portfolio
• Expected $40 million in sales and $21 million in adjusted EBITDA from Applied Avionics for 2024
• Anticipated tax benefits of $45 million from the transaction
• Over 75% of Applied Avionics' sales derived from the aftermarket, strengthening Loar's strategic focus
• Acquisition aligns with Loar's strategy to enhance niche capabilities and proprietary product offerings

Negative

• Additional borrowings required to finance the acquisition, potentially increasing debt burden

Insights

Financial Analyst

Loar Holdings Inc.'s acquisition of Applied Avionics for $385 million represents a significant investment aimed at enhancing its product portfolio with highly engineered avionics interface solutions. Applied Avionics' strong presence in both commercial and military aerospace markets is a valuable addition to Loar's offerings. The expected sales and adjusted EBITDA for Applied Avionics in 2024 are $40 million and $21 million, respectively. This suggests a healthy EBITDA margin of 52.5%, indicating strong profitability. Loar also anticipates tax benefits of approximately $45 million from this transaction, effectively lowering the purchase price multiple to around 16x the projected adjusted EBITDA. For context, a 16x multiple is within a standard range for high-quality, high-growth businesses in the aerospace sector, especially those with proprietary technology and strong margins.

From a financial perspective, this acquisition could be beneficial in the long term by diversifying revenue streams and increasing market share in the aerospace sector. On the downside, the acquisition will be financed through additional borrowings, which might increase Loar's leverage and interest obligations. Investors should monitor how the integration of Applied Avionics progresses and its impact on Loar’s balance sheet and overall financial performance.

Market Research Analyst

Applied Avionics' strong aftermarket focus is particularly notable, with over 75% of its sales derived from this segment. The aftermarket in the aerospace industry generally offers higher margins and recurring revenue opportunities compared to OEM sales, due to the ongoing need for maintenance, repair and upgrades of aircraft. This alignment with Loar’s strategic focus on niche capabilities and proprietary products could help the company capture more value in the aerospace value chain. Furthermore, Applied Avionics’ established brands, VIVISUN® and NEXSYS®, are well-regarded in the industry, which could enhance Loar’s competitive positioning and brand recognition.

Looking at the competitive landscape, this acquisition places Loar in a stronger position against other aerospace component suppliers, potentially enabling it to offer more comprehensive solutions to its customers. However, the success of this acquisition will also depend on how well Loar can integrate Applied Avionics’ operations and whether it can retain key talent and customers during the transition.

Aerospace Industry Expert

The acquisition of Applied Avionics by Loar Holdings is a strategic move to bolster its presence in the aerospace interface solutions market. Applied Avionics' proprietary technology and products serve critical functions in both commercial and military aerospace applications, which are sectors known for robust demand and long-term growth prospects. Specifically, the proprietary nature of Applied Avionics' product designs means that their solutions are tailored to specific customer needs, creating high barriers to entry for competitors and fostering strong customer loyalty.

Moreover, Applied Avionics' emphasis on world-class quality and innovation aligns well with industry standards and customer expectations. For Loar, acquiring a company with such a reputation can significantly enhance its technological capabilities and market credibility. However, the long-term success of this acquisition will depend on Loar's ability to continue innovating and meeting the evolving needs of the aerospace sector.

WHITE PLAINS, NY / ACCESSWIRE / July 19, 2024 / Loar Holdings Inc (NYSE:LOAR) ("Loar," "we" and "our"), today announced that it has signed a definitive agreement to acquire Applied Avionics, Inc. ("Applied Avionics") for $385 million in cash.

Incorporated in 1968, Applied Avionics designs, develops, and manufactures highly engineered avionics interface solutions. Applied Avionics' brands, VIVISUN® and NEXSYS®, are the preferred choices of leading aircraft retrofit providers, military prime contractors, Tier 1 suppliers, and OEMs, among others, reflecting Applied Avionics' passion for exceptional customer service, world-class quality and reputation as an innovative solutions provider. Given the bespoke nature of the solutions, nearly all Applied Avionics' revenues are derived from proprietary designs. Applied Avionics products are found on a multitude of platforms in both the commercial and military aerospace and defense end-markets. Applied Avionics employs over 80 teammates at its headquarters and manufacturing facility in Fort Worth, Texas. We expect that Applied Avionics sales and adjusted EBITDA for the year ending December 31, 2024, will be approximately $40 million and $21 million, respectively. Loar expects to receive tax benefits of approximately $45 million as a result of the transaction. Therefore, including the estimated tax benefit, Loar's effective purchase price multiple will be approximately 16x Applied Avionics 2024 adjusted EBITDA.

"We are excited about the addition of Applied Avionics to the Loar family." stated Dirkson Charles, CEO and Executive Co-Chairman of the Board of Directors of Loar. "Applied Avionics fits our strategic initiative of adding niche capabilities and proprietary products to our suite of customer solutions. Additionally, over 75% of Applied Avionics' sales are derived from the aftermarket, further strengthening this attribute and strategic focus of Loar."

The transaction is expected to close shortly after receiving requisite regulatory approvals and is subject to customary closing conditions. The acquisition will be financed through additional borrowings under Loar's existing credit agreement and cash on-hand.

About Loar Holdings Inc.

Loar Holdings Inc. is a diversified manufacturer and supplier of niche aerospace and defense components that are essential for today's aircraft and aerospace and defense systems. Loar has established relationships across leading aerospace and defense original equipment manufacturers and Tier Ones worldwide.

Forward Looking Statements

This press release includes express or implied forward-looking statements. Forward-looking statements include all statements that are not historical facts including those that reflect our current views with respect to, among other things, Loar's ability to timely close on the acquisition of Applied Avionics, Loar's ability to finance such acquisition and the expected financial performance of Applied Avionics. The words "anticipate," "assume," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "future," "will," "seek," "foreseeable," the negative version of these words or similar terms and phrases may identify forward-looking statements in this press release, but the absence of these words does not mean that a statement is not forward-looking.

Actual results may differ materially from our expectations due to changes in global, regional, or local economic, business, competitive, market, regulatory, and other factors, many of which are beyond our control. We believe that these factors include but are not limited to the following: the almost exclusive focus of our business on the aerospace and defense industry; our heavy reliance on certain customers for a significant portion of our sales; the fact that we have in the past consummated acquisitions and our intention to continue to pursue acquisitions, and that our business may be adversely affected if we cannot consummate acquisitions on satisfactory terms, or if we cannot effectively integrate acquired operations; and the other risks and uncertainties described under "Risk Factors" of Loar's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the Securities and Exchange Commission ("SEC") on May 14, 2024, and other periodic reports filed by Loar from time to time with the SEC.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this press release. Any forward-looking statement made by us in this press release speaks only as of the date of this press release and is expressly qualified in its entirety by the cautionary statements included in this press release. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. We undertake no obligation to publicly update or review any forward-looking statement, whether because of new information, future developments or otherwise, except as may be required by any applicable law.

Contact

Ian McKillop
Loar Group Investor Relations
IR@loargroup.com

SOURCE: Loar Group Inc.

View the original press release on accesswire.com

FAQ

What is the acquisition price for Applied Avionics by Loar Holdings (NYSE:LOAR)?

Loar Holdings Inc (NYSE:LOAR) has agreed to acquire Applied Avionics, Inc. for $385 million in cash.

What are the expected financial metrics for Applied Avionics in 2024?

Applied Avionics is expected to generate approximately $40 million in sales and $21 million in adjusted EBITDA for the year ending December 31, 2024.

What tax benefits does Loar Holdings (NYSE:LOAR) expect from the Applied Avionics acquisition?

Loar Holdings expects to receive tax benefits of approximately $45 million as a result of the transaction.

What is the effective purchase price multiple for the Applied Avionics acquisition by Loar Holdings (NYSE:LOAR)?

Including the estimated tax benefit, Loar's effective purchase price multiple will be approximately 16x Applied Avionics' 2024 adjusted EBITDA.

How does the Applied Avionics acquisition align with Loar Holdings' (NYSE:LOAR) strategy?

The acquisition aligns with Loar's strategic initiative of adding niche capabilities and proprietary products to its suite of customer solutions, with over 75% of Applied Avionics' sales coming from the aftermarket.