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Canadian aerospace firms’ values take off

Industrial conglomerate United Technologies Corp. purchase of aerospace manufacturer Goodrich Corp. for about $16.4 billion will significantly expand its aerospace business and boosts the value of two Canadian firms.


September 22, 2011
by CANADIAN PRESS

LOS ANGELES: Industrial conglomerate United Technologies Corp. purchase of aerospace manufacturer Goodrich Corp. for about $16.4 billion will significantly expand its aerospace business and boosts the value of two Canadian firms.

United Technologies already owns jet engine manufacturer Pratt & Whitney (as well as Carrier heating and cooling, Otis elevator and other businesses).

Industry analysts said the transaction boosts the implied value of Canadian flight simulator company CAE Inc. and landing gear maker Heroux-Devtek and makes them both potential takeover targets.

Benoit Poirier of Desjardins Securities said Montreal-based CAE would be an attractive target because of its profitability, market share leadership and lack of controlling shareholder. But he said it is uncertain whether the Canadian government would allow CAE to be purchased.

Applying the valuation of the UTC deal, CAE’s stock market value would be C$17.50, a 74% premium over Wednesday’s closing price.

Heroux-Devtek’s value would be $16.50, a 128% premium.

“We believe that Heroux is a potential takeover target for similar reasons to CAE…however, there are more uncertainties around the military market, which represents about 60 per cent of its total revenues,” he wrote in a report.

Hartford, Connecticut-based United Technologies said it expects to finance the deal through a combination of debt and by issuing stock. The equity component of the deal is expected to be about 25% per cent of the transaction, the company said.

The combined companies are expected to post annual sales of about $66 billion and the addition of Goodrich is expected to boost United Technologies’ profits in the second year.

Related news:
United Technologies acquires Goodrich Corp. in $18.4 billion mega-deal

© 2011 The Canadian Press