Boeing (BA) confirmed it sealed a deal to acquire parts supplier KLX (KLXI) for $3.25 billion as it moves to save money by bringing more supply-chain duties in-house.
XThe aerospace giant is to pay $63 per share for the Miami-based business, which values the company at $4.25 billion after around $1 billion of net debt is included.
The deal's closure is subject to regulatory clearance and the approval by a majority of KLX shareholders. The sale is expected to close by Q3. It also requires divestment of KLX's energy operation.
KLX said Dec. 22 it would review strategic alternatives including a potential sale.
Dow Jones industrial average stock Boeing closed down 1.2% at 329.54 on the stock market today. KLX fell 8.6% to 71.49 after surging 9% to 80.05 after the Wall Street Journal first reported a deal was imminent. Among other aerospace suppliers, Spirit AeroSystems (SPR) fell 1.3, TransDigm (TDG) lost 1.9% and Triumph Group (TGI) fell 1.1%.
Boeing has been trying to bring more supply-chain duties in-house in an effort to squeeze out more savings.
CEO Dennis Muilenburg also said last week that strategic acquisitions would be used to grow its services arm. The company is aiming for annual cost savings of about $70 million by 2021.
KLX will merge with the manufacturing behemoth's parts, equipment and services unit Aviall, which is part of Boeing Global Services.
"This acquisition is the next step in our services growth strategy, with a clear opportunity to profitably grow our business and better serve our customers in a $2.6 trillion, 10-year services market," Boeing Global Services president and CEO Stan Deal said in a news release.
He also said the move will allow the firm to provide a "one-stop shop" for customers.
KLX Chairman and CEO Amin Khoury said the deal will deliver growth while benefiting everyone on the supply chain.
"This business combination will enable us to deliver industry-leading value-added service solutions for our customers, and outstanding growth opportunities for our suppliers," he said in a news release.
KLX stocks over 1 million part numbers for OEMs, MROs and airlines. It has more than 2,000 employees in over 65 locations around the world. It works in the military, commercial and business jet spaces, making it a valuable addition to Boeing.
"Acquisition of KLX's aerospace operations is a scale play for Boeing's Global Services segment, as the company pursues its multi-year goal of tripling this segment's revenue to $50 billion." Moody's analyst Jonathan Root said in a note. "This deal will make aircraft services subsidiary Aviall more of a 'one-stop-shop' for a wide swath of commercial and defense aerospace customers."
Meanwhile, Boeing is still in talks to acquire Embraer's (ERJ) commercial-jet business.
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The post Boeing Beefs Up Savings Strategy With This Multibillion-Dollar Deal appeared first on Investor's Business Daily.
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