Fonds de solidarité backs Héroux-Devtek’s acquistion of Airbus’ CESA

Héroux-Devtek Inc. (TSX: HRX), a global manufacturer of aerospace products, has agreed to acquire Compañia Española de Sistemas Aeronauticos, S.A. (CESA), a subsidiary of Airbus SE (PA: AIR), for €140 million or CDN $205 million enterprise value.

Héroux-Devtek intends to fund the acquisition with a $50 million seven-year unsecured subordinated term loan provided by Fonds de solidarité FTQ, the assumption of debt of €29 million or CDN $42 million, an increase of Héroux-Devtek’s existing revolving credit facility to $250 million, and available cash balance.

Madrid, Spain based CESA is a leading European provider of fluid mechanical and electromechanical systems for the aerospace industry. Its main product lines include landing gear, actuation and hydraulic systems. CESA provides an integrated product and service offering comprised of design and development engineering, certification, manufacturing, assembly and fleet support to a broad range of customers and aircraft programs. It has cultivated long-term relationships with customers across several key platforms. It operates a 366,000 square foot state-of-the-art industrial complex in Madrid, as well as another facility in Seville. CESA employs a skilled workforce of approximately 340 employees.

“The acquisition of CESA marks a pivotal moment in Héroux-Devtek’s international expansion. This transaction will allow us to increase our presence with Airbus, hence giving us better access to one of the largest aircraft manufacturers in the world. With this transaction, we are significantly increasing our presence in Europe, expanding our product and service offering into complementary activities, adding a significant intellectual property rights portfolio, as well as gaining important content on several key aircraft programs and customers. CESA has a strong management team with talented and committed employees and we are looking forward to having them join us. We are very excited to continue building a sustainable future for the Corporation and creating value for our shareholders by proceeding with the largest acquisition in our history,” said Gilles Labbé, President & CEO of Héroux-Devtek.

“This transaction is in line with our strategic objective of expanding into activities that complement our core landing gear market. In addition to providing us with incremental landing gear business, CESA’s world-class expertise in actuation and hydraulic systems will allow Héroux-Devtek to further enhance its reputation as a key supplier to leading global aerospace original aircraft manufacturers,” added Réal Bélanger, Executive Vice-President, Business Development and Special Projects of Héroux-Devtek.

“For Airbus, the key criteria for the selection of the final candidate was based on their ability to provide a solid and strong industrial plan for CESA as well as an industrial strategic fit and an engagement towards the employees. This is both in the interest of CESA to continue its growth path as well as for Airbus, since CESA will remain a very important Tier-1 supplier for Airbus Defence and Space and the Airbus group in general. This acquisition fully fulfills these criteria and is a win-win for all parties involved offering CESA the possibility to move up to a next level,” said Fernando Alonso, CEO of Airbus Defence and Space, S.A.U.

CESA sales are expected to be approximately €94 million or CDN $136 million with an Adjusted EBITDA1 of approximately €11 million or CDN $16 million for the calendar year ending December 31, 2017.

Héroux-Devtek’s pro forma net debt is expected to be approximately 3.9 times its Adjusted EBITDA (2.6 times excluding government loans) at the expected closing date of the Transaction. Twelve months following the acquisition, the pro forma net debt is expected to decrease below 3.0 times Adjusted EBITDA (below 2.0 times excluding government loans).

National Bank Financial Inc. acted as exclusive financial advisor to Héroux-Devtek and Lavery, de Billy L.L.P. and Hogan Lovells International LLP acted as legal advisors to Héroux-Devtek. The committed bank debt financing for the Transaction is provided by National Bank of Canada as sole lead arranger and bookrunner.