TransDigm to Acquire DART Aerospace For $360M

In a major move, TransDigm Group (TDG) has agreed to acquire DART Aerospace for about $360 million.

TDG designs, produces, and provides engineered aircraft components that are used on commercial as well as military aircraft.

Meanwhile, DART is a portfolio company of Greenbriar Equity Group and First Aviation Services. DART provides engineered and unique helicopter mission equipment solutions, which chiefly service civilian aircraft.

DART is expected to garner $100 million in pro forma revenue for 2022 and generate 95% of revenue from proprietary products.

Management Weighs In

President and CEO of TDG, Kevin Stein, commented, “Dart is an industry leader in helicopter mission equipment and its unique helicopter solutions fit well with our proprietary and aftermarket-focused value generation strategy.”

He added, “The company has established positions on a diverse range of new and existing rotary-wing platforms, strong aftermarket content, and an outstanding reputation with its customers. As with all TransDigm acquisitions, we expect the dart acquisition to create equity value in-line with our long-term private equity-like return objectives.”

TransDigm is financing this acquisition with cash on hand and the transaction is expected to close in the second calendar quarter of 2022.

Analysts’ Take

Recently, Robert W. Baird analyst Peter Arment reiterated a Buy rating on the stock alongside a price target of $720. Overall, the Street has a Strong Buy Consensus rating on TDG based on 9 Buys and a Hold. The average TransDigm price target of $753 implies a potential upside of 21.8% for the stock. 

Valuation Speaks

Now let’s have a look at some of the key metrics for TDG and how it fares against the broader industry. TDG has an earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 44.1%, which is more than two times better than the industry median of 13.2%.

Notably, TDG generates $59.6 thousand in net income per employee, whereas the median industry figure is $20.5 thousand, indicating TDG is superior in utilizing its workforce.

Further, the forward EV/EBITDA multiple for TDG is at 19.53, while the median figure for the industry is 11.20, indicating TDG’s current share price level is on the expensive side versus its industry peers.

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