Rockwell Collins Takes A Gamble on Smart Jets and Buys B/E Aerospace in $6.4 Billion Deal

rockwell-collinsRockwell Collins Inc. has put in a $6.4 billion bid to acquire B/E Aerospace Inc. This will be the company’s biggest acquisition of all time, and its all based on a bet that amenity improvements to airplanes will encourage new airplane sales and revitalize commercial travel. This includes technology like lie-flat seats and toilet valves that can send live data to inflight crews and even maintenance workers back on the ground.

This new purchase of B/E Aerospace Inc. will, then, eclipse the now 83-year-old avionics maker’s previous takeover of Arinc Inc, which happened in 2013. And that deal only occurred within just two weeks of Kelly Ortberg—the new chief executive officer—had enacted new ways to thread data through airplanes. Now joining with B/E Aerospace, Ortberg will have more access to the largest aircraft cabins equipment supplier, providing Rockwell Collins an improve opportunity to deliver new data to airline operators.

“It sets us up for the future,” Ortberg explains. “We’ve made major investments in next-generation airplanes. That trend is going to translate into the interiors of aircraft.”
B/E Aerospace is already the largest supplier of aircraft cabin equipment, with 30,000 employees, more than $8 billion in revenue, and roughly $2 billion in earnings.

Obviously, this purchase will also broadly expand the Cedar Rapids, Iowa-based firm’s existing product portfolio. This is a portfolio that has obviously focused on aircraft communications and computing equipment since the company spun-off of Rockwell International, 15 years ago.

Though it is the most recent deal in a handful of aerospace mergers (involving suppliers to such names as Boeing Co and Airbus Group SE) the deal is not expected to close until early next year.

As major companies continue to cut as many costs as possible—and as quickly as possible—from slower growth after a decade-long sales cycle, Teal Group aerospace analyst Richard Aboulafia notes, “It’s an opportunity to build a smarter plane.. Given the pricing pressure you’ll probably see more deals like this.”

Of course, time will tell if and how they manage to make this merger work and, potentially, pave the way for others to use innovation as a means to improve performance, increase efficiency and, obviously, reduce costs to increase profits.

Latest News