Honeywell Sells Support Unit to BE Aerospace

Diversified manufacturer Honeywell International will sell its aerospace fasteners distribution business to B/E Aerospace for $1.05 billion in cash and stock, the companies said on Monday.


B/E said the deal would expand its direct sales and product support organization; Honeywell said selling the unit would allow it to focus on more advanced technologies.

The unit distributes nuts, bolts and other hardware used on aircraft globally, and also provides logistics services to original equipment manufacturers.

The purchase price -- at least $800 million in cash and the rest in B/E common stock -- represents a multiple of twice the unit's $524 million in revenue last year.

That is about double the aerospace and defense sector's price-to-sales ratio of 1.1 to 1, according to Reuters data.

As part of the deal, B/E, which last year generated $1.68 billion in revenue, will enter into a 30-year contract to become Honeywell's exclusive licensee to sell fasteners, seals and other such products to the global aerospace industry.

Honeywell's fasteners unit distributes components made by 150 outside manufacturers as well as some made by Honeywell.

B/E, the world's largest maker of plane seats, said the deal should yield savings of at least $84 million per year by 2011. It said it expects the transaction to reduce its earnings per share slightly this year, but add to them in 2009 and 2010.

Wellington, Florida-based B/E increased its earnings-per-share forecast by 5 cents for 2009 to about $2.85, and by 15 cents for 2010 to about $3.65.

Honeywell expects the deal to close in the third quarter.

The Morris Township, New Jersey-based company has worked to land larger-scale contracts, such as its March accord to supply flight management systems for Airbus' upcoming A350XWB jet, and an April deal worth $23 billion to supply engines for Brazilian aircraft maker Embraer's mid-size business jets.

Airbus is owned by European aerospace company EADS.

Aerospace last year was Honeywell's second-largest business, generating $12.24 billion in revenue, representing 35 percent of the corporate total.

B/E shares were up $1.40, or 5 percent, to $28.38 in morning trade on Nasdaq, while Honeywell shares rose $1.13, or 2 percent, to $55.14 on the New York Stock Exchange.

So far this year B/E shares have tumbled 46 percent, compared with a decline of 15 percent in the Dow Jones U.S. Aerospace Index, of which B/E is a component. Honeywell shares are down 10 percent.