AAR completes acquisition of Triumph Group's Product Support business

Rhea-AI Summary

AAR Corp. (NYSE: AIR) completes the acquisition of Triumph Group's Product Support business for $725 million. The acquisition is funded by a $550 million notes offering and an amendment to AAR's revolving credit facility. This acquisition enhances AAR's repair capabilities, expands its global footprint, and adds expertise to serve its customers.

Positive

• AAR Corp. completes the acquisition of Triumph Group's Product Support business for $725 million.
• Funding for the acquisition was secured through a $550 million notes offering and an amendment to AAR's revolving credit facility.
• The acquisition enhances AAR's repair capabilities and expands its global footprint.
• More than 700 team members from Triumph Group's Product Support business join AAR, bringing expertise in key areas to the company.

Negative

• None.

Financial Analyst

The completion of AAR CORP.'s acquisition of Triumph Group's Product Support business represents a significant strategic move with potential to affect AAR's financial position and market performance. The transaction, valued at $725 million, is substantial, considering AAR's market capitalization and financial scale. Funding the acquisition through a combination of a $550 million notes offering and an expanded revolving credit facility indicates a leveraged purchase, which could affect the company's debt-to-equity ratio and interest coverage metrics. Investors will closely monitor how the increased debt load will impact AAR's financial health, particularly its cash flow and profitability ratios.

Moreover, the expansion of AAR's repair capabilities and its geographical footprint in the APAC region could lead to revenue diversification and growth. However, the integration of over 700 new employees and the assimilation of the acquired business's operations will be pivotal in realizing the anticipated synergies. The market will also assess whether AAR can achieve cost efficiencies and maintain quality service without disrupting existing operations. In the short term, transaction costs and integration expenses might pressure earnings, but long-term gains could be realized if the acquisition leads to an expanded customer base and enhanced service offerings.

Market Research Analyst

From a market perspective, the acquisition of Triumph Group's Product Support business by AAR CORP. can be seen as a move to consolidate AAR's market position in the MRO (Maintenance, Repair and Overhaul) sector. The MRO industry is highly competitive, with growth driven by increasing air traffic and the aging of aircraft fleets. The addition of specialized maintenance and overhaul capabilities, particularly for critical aircraft components, could give AAR a competitive edge in both commercial and defense markets.

The strategic importance of the APAC region cannot be understated, as it's projected to experience significant growth in the aviation sector. The acquisition could thus position AAR to capitalize on this growth. However, the success of this expansion will depend on AAR's ability to integrate the new business efficiently and to navigate the complex regulatory environments across different countries. Long-term, if AAR successfully leverages the expertise of the new team members and integrates the additional capabilities, the company could see an increase in its market share and a strengthened global presence.

Economist

The acquisition of Triumph Group's Product Support business by AAR CORP. could have broader economic implications, particularly within the aviation services industry. This acquisition might signal a consolidation trend within the sector, which could alter competitive dynamics and potentially lead to higher market concentration. Such industry consolidation can lead to economies of scale and bargaining power with suppliers, but may also raise concerns about reduced competition.

Additionally, the financing structure of the acquisition, involving notes offering and credit facility expansion, reflects current credit market conditions and investor confidence in AAR's growth prospects. The economic impact will largely depend on AAR's ability to manage the increased debt in a way that does not hinder its operational flexibility. If successful, the acquisition could stimulate further investment in the sector, as companies strive to enhance their service offerings and geographic reach in response to evolving market demands.

• Also completed financings to fund the Acquisition, consisting of $550 million notes offering and an amendment to AAR's existing revolving credit facility, upsizing the facility from $620 million to $825 million

WOOD DALE, Ill., March 1, 2024 /PRNewswire/ -- AAR CORP. (NYSE: AIR) ("AAR" or the "Company"), a leading provider of aviation services to commercial and government operators, MROs, and OEMs, today announced that it has completed its acquisition of Triumph Group's (NYSE: TGI) Product Support business.  Triumph Group's Product Support business is a leading global provider of specialized maintenance, repair, and overhaul capabilities for critical aircraft components in the commercial and defense markets.

AAR previously announced on December 21, 2023, that it had entered into a definitive agreement to acquire Triumph Group's Product Support business for an aggregate purchase price of $725 million in cash, subject to customary adjustments. The transaction was financed with proceeds from AAR's previously announced $550 million notes offering and borrowings under its amended revolving credit facility.

"The completion of this acquisition scales AAR's repair capabilities, expands our footprint in the APAC region, and enhances our ability to serve our global customers," said John M. Holmes, AAR's Chairman, President and CEO. "We're excited to welcome more than 700 team members from the Product Support business who bring expertise in key areas to the AAR team."

About AAR
AAR is a global aerospace and defense aftermarket solutions company with operations in over 20 countries. Headquartered in the Chicago area, AAR supports commercial and government customers through four operating segments: Parts Supply, Repair & Engineering, Integrated Solutions, and Expeditionary Services. Additional information can be found at aarcorp.com.

Forward-looking Statements
This press release contains certain statements relating to future business opportunities and conditions, as well as anticipated benefits of the proposed acquisition by the Company of Triumph Group's Product Support business (the "Acquisition"). Such statements are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995 and reflect management's expectations about future conditions. Forward-looking statements often address our expected future operating and financial performance and financial condition, or sustainability targets, goals, commitments and other business plans, and often may also be identified because they contain words such as "anticipate," "believe," "continue," "could,'' "estimate," "expect," "intend," "likely," "may," "might," "plan," "potential," "predict," "project," "seek," "should," "target," "will," "would," or similar expressions and the negatives of those terms. Factors that may cause actual results to differ materially from current expectations include, among others, risks associated with the Company's ability to successfully integrate the acquired business; the Company's ability to realize the anticipated benefits and synergies of the Acquisition as rapidly or to the extent anticipated; the effect of the Acquisition on the Company's operating results and business generally; the amount of costs, fees and expenses related to the Acquisition; and other factors that could affect the Company's business. These forward-looking statements are based on beliefs of Company management, as well as assumptions and estimates based on information currently available to the Company, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. For a discussion of these and other risks and uncertainties, refer to "Risk Factors" in the Company's most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, as well as the Company's other subsequent filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described and the anticipated benefits of the Acquisition may not be realized. These events and uncertainties are difficult or impossible to predict accurately and many are beyond the Company's control. The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company assumes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by law.

Contact:
Dylan Wolin
Vice President, Strategic & Corporate Development and Treasurer
+1-630-227-2017
dylan.wolin@aarcorp.com

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SOURCE AAR CORP.

What is the ticker symbol for AAR Corp.?

The ticker symbol for AAR Corp. is AIR.

How was the acquisition of Triumph Group's Product Support business funded?

The acquisition was funded through a $550 million notes offering and an amendment to AAR's revolving credit facility.

What benefits does the acquisition bring to AAR Corp.?

The acquisition enhances AAR's repair capabilities, expands its global footprint, and adds expertise to serve its customers.

How many team members from Triumph Group's Product Support business join AAR Corp.?

More than 700 team members from Triumph Group's Product Support business join AAR, bringing expertise in key areas to the company.