BNP Paribas has reaffirmed its "Outperform" rating on TransDigm (TDG.US), stating that the company's latest acquisition deal provides further evidence that its M&A-driven growth strategy remains solidly on track. Aerospace components supplier TransDigm, headquartered in Cleveland, Ohio, USA, announced it will acquire Stellant for $960 million from private equity firm Arlington Capital Partners. Stellant provides high-power electronic products serving end markets such as aerospace, defense, medical, and industrial, with related applications covering electronic warfare, radar systems, communications, directed energy, and space propulsion. The company is projected to achieve approximately $300 million in revenue in the 2025 calendar year and currently employs about 950 people in the United States. TransDigm's core business involves designing, producing, and supplying highly engineered aircraft components that are critical for the safe and efficient operation of nearly all commercial and military aircraft worldwide. The company operates through its wholly-owned subsidiary, TransDigm Inc., and divides its business into three main segments: Power & Control (focusing on systems and components that provide or control power for aircraft, such as actuators and controllers), Airframe (involving systems and components for airframe and cabin structure applications, such as latches and rod assemblies), and Non-Aviation (developing products for non-aviation markets like ground transportation). The company's business model is predominantly M&A-driven, rapidly expanding its operations by acquiring firms with proprietary technologies; it has completed over 60 acquisitions within 25 years of its founding, forming a supply chain network encompassing 123 subsidiaries. Analyst Matthew Akers stated that TransDigm's agreement to acquire Stellant highlights the continued momentum of its M&A program and also helps alleviate market concerns about the increasing scarcity of high-quality acquisition targets. The analyst noted that this deal is highly consistent with TransDigm's consistent M&A "playbook" and further strengthens market confidence in the sustainability of its private equity-like value creation capabilities. BNP Paribas believes Stellant is a highly strategic fit for TransDigm, citing reasons including its approximately 50% aftermarket exposure and significant potential for operational improvements identified by the bank. Based on estimates, Stellant's sales per employee are about half of TransDigm's current level, indicating room for efficiency gains. Assuming synergies of approximately 4% of the acquired business's sales (broadly in line with historical Aerospace & Defense industry transactions), the analyst expects the deal to add about 1% to TransDigm's fiscal 2027 earnings per share; under more aggressive pricing assumptions, the accretion could reach 3% to 5%. The analyst added that the recent series of deals has maintained a steady pace, making the view that "TransDigm's M&A pipeline is drying up" increasingly untenable. Based on this assessment, the analyst raised the stock's price target from $1,775 to $1,900, citing the use of higher comparable company valuation multiples while still applying a relatively conservative premium compared to TransDigm's historical trading levels.
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