Aerospace & Defense
Global Overview
2017
Aerospace & Defense Market Insights
General Overview | 2017
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janescapital.com
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Aerospace & Defense Market Insights
Country Overview | 2017
Belgium Aerospace & Defense Overview
The Belgian aerospace market is primarily comprised of small and medium enterprises (SMEs) producing assemblies, sub-assemblies and components for various aircraft, and offering various maintenance, repair and overhaul (MRO) services. These SMEs focus on advanced, small-batch production capabilities in both metallurgy and composite materials. The overall aerospace and defense (A&D) industry has total revenues of US$3.7 billion, representing a compound annual growth rate (CAGR) of 4.1% since 2010. The A&D industry is expected to grow at a 0.8% CAGR in the near-future, with the industry expected to reach a value of US$3.9 billion by the end of 2019. Recently, civil aerospace has been the Belgian A&D industry’s most lucrative segment, representing over 70% of the industry's total market. Belgium’s defense industry is fully privatized and centered on manufacturing components, subassemblies and small arms rather than full weapon systems and platforms. As a small nation, Belgium cannot maintain a large defense industry based on internal requirements, and instead, relies on external components and subcontractor work on major defense programs. Belgium’s military, similarly to other countries in Europe, is aging. The average soldier is 43 years old and the number of soldiers has declined from 40,000 in 2006 to 32,000 in 2016. Due to this decline, Belgium is streamlining its forces to no longer have a separate army, navy and air force, but rather a unified defense entity with a land, sea and air component served by a joint medical component. Additionally, Belgium has developed the Belgian Soldier Transformation (BEST) program integrating the latest technologies, including smart textiles, enhanced integrated and scalable communication, personal optics and global positioning.
Belgian Deal Spotlight: Sonaca to Acquire LMI Aerospace
Transaction Highlights Deal Financials
Belgian Region Spotlight: Wallonia
• The aerospace industry in Wallonia turns over almost US$1.9 billion annually and employs 5,800 people, including 1,400 in the space research sector
• On February 16, 2017, LMI Aerospace Inc. Transaction Value: US$432M
(Nasdaq:LMIA) agreed to be acquired by Sonaca Equity Value: for US$14/share (representing 52% premium TEV/Sales: over LMI’s closing share price on February 16, TEV/EBITDA:
US$192M
- 1.2x
- a
• The A&D industry was initially funded with
state investment. Today, several of Wallonia’s large companies are foreign-controlled
• Companies with key investments in the region
include SABCA (plant in Charleroi), Safran
(subsidiary Techspace Aero), Thales (two businesses in the region) and Sonaca (stateowned, based in Charleroi)
12.5x
Wallonia
2017)
Announced Date: 02/16/17
• Sonaca Group is a Belgian company known for its capability to produce advanced aerostructures
• LMI Aerospace is a leading supplier of structural assemblies, kits and components
• The transaction closed on June 27, 2017
- Select Belgian A&D Transactions
- Select Company Profiles
- ($ in US millions)
- ($ in US millions)
TEV / TEV /
- Date
- Target
- Acquirer
- TEV Sales EBITDA
- Company
- Commentary/Investments
07/16/17 ADB Safegate 11/07/16 Advanced Circuit Boards 10/10/16 Gatewing
- –
- –
–
––
The Carlyle Group
•
•
Manufactures high lift devices, complex mechanical assemblies,
and functional components for the aerospace industry On February 22, 2017, ASCO signed a long-term contract with Boeing for the production of hard metal and aluminum structural components and assemblies The agreement, valid until 2024, includes both the renewal of existing work on the 737 MAX, 747-8, 777 and 787 platforms, as well as several new packages on the 777X
–
Edmond de Rothschild, Cabestan Capital
- –
- –
- –
Delair-Tech
•
04/29/16 TCR International 12/21/15 Marlink
$200 $437
$21
–
4.3x
–
5.3x
–
3i Infrastructure Altamir, Apax Partners
Teledyne Technologies
PARTER Capital Group Axle Holdings
•••
Manufactures metal and composite structures, servo-systems and sub-assemblies A joint venture between Dassault Group and Fokker Technologies (GKN Group)
Focuses on “plug and fly” integrated structures, actuation
systems and MRO and upgrades of platforms and equipment
06/05/15 Industrial Control
Machines
- –
- –
01/21/15 Cassidian Belgium
- –
- –
01/08/15 Carat Security Group
- –
- –
- –
••
Manufactures aerospace structures, such as movable wing leading edges and wing skins, for civil, military and space markets LMI Aerospace (US$432, 2017) – provides structural assemblies, kits and components and design engineering services to the aerospace and defense market
09/29/14 Barco (aerospace and defense display business)
$189 $165 $270
1.0x
–
7.4x
–
Esterline
- 04/24/14 Mecar
- Giat Industries
- 03/04/13 ADB
- 1.3x
–
PAI Partners
Sources: CapIQ, Export.gov, Marketline, GlobeNewswire
Stephen Perry
Managing Director (949) 769-3323 x302 [email protected]
- Alyssa Morrisroe
- Ilana Germaine
Vice President
(949) 769-3323 x308
Manu De Vries
Director
+32-2-429-22-53
Stefan Goethals
Head of Corporate Finance
+32-2-429-32-10
Tom Van de Meirssche
- Senior Associate
- Managing Director
- (949) 769-3323 x306
- +32-2-429-32-19
Aerospace & Defense Market Insights
Country Overview | 2017
China Aerospace & Defense Overview
In 2016, the aerospace and defense industry in China continued to grow due to increases in defense spending and changes to the Catalogue of Industries for Guiding Foreign Investment, which expanded the range of approved investment activities of foreign entities into the aviation sector. These changes should allow foreign companies to manufacture small scale aircraft parts, including aircraft engine components and bearings, and drive foreign M&A and direct investment activities. In 2016, China’s defense budget was the second largest in the world, as it rose 6.2% to US$192.0 billion. China’s military expenditure as a percentage of GDP is only 1.9%, which is low compared to other countries like India (2.3%), the US (3.3%) and Russia (5.4%), indicating additional capacity to
increase military spending. The President of China, Xi Jinping, reduced armed forces personnel by approximately 13.0% (300,000 people) earlier this year as
part of China’s ongoing restructuring to modernize its military with robust cyber warfare and joint operation capabilities. The commercial aerospace sector has also seen rapid growth, and China’s domestic aviation market is expected to become the world’s largest by 2035, surpassing North America and Europe with 1.9 trillion revenue passenger kilometers projected by 2035. Within the next 20 years, 6,810 new aircraft would be required to meet this growing travel demand. Domestic and global demand for travel has caused the country to enter the commercial aircraft manufacturing business itself in order to reduce dependency on Boeing and Airbus. Chinese state-owned aircraft manufacture, COMAC, plans to produce a 158 seat singaisle aircraft, with 570 order commitments received from 23 customers. COMAC believes that its new aircraft, the COMAC C919, has a market potential of nearly US$100 billion, and additionally has entered into a joint venture with UAC in Russia to develop a wide-body jet, the COMAC C929.
- Public Comparable Companies
- COMAC C919 Spotlight
($ in US millions)
Key Statistics
Market Cap
- LTM
- TEV / LTM LTM EBITDA
Margin
2.8%
- TEV
- Revenue EBITDA
First Flight
May 5th 2017
- AVIC Aircraft
- $7,141 $6,726
$6,917 $9,234 $3,863 $4,378 $3,683 $5,708 $3,552 $3,204
$3,724 $3,249 $1,005 $5,275 $1,767 $1,731
NM
Boeing 737 Airbus A320
Competition
AECC Aviation Power China Avionics Systems AviChina
22.5x 24.0x 10.9x 25.6x 23.6x
21.3x
12.4% 13.5%
9.7% 6.8% 8.1%
8.9%
• The COMAC C919 is a 158 seat, narrow-body twinjet airliner developed by Chinese aerospace manufacturer COMAC
Current Order Count
570 orders
23 buyers
Avicopter
- • Multinationals have played
- a
- large role in the
List Price
US$50 million
2,000 units
China Aerospace Times E $3,031 $3,431
development of the C919, with GE supplying engines and avionics and Honeywell supplying navigation equipment and fly-by-wire controls
Mean
Estimated Sales (20 years)
Trading metrics as of 6/6/17. Valuation multiples based on LTM financial data as of 3/31/17
- Select Recent Chinese Acquisitions of Western A&D Firms
- Select Company Profiles
Commentary/Investments
- ($ in US millions)
- ($ in US millions)
TEV / TEV /
- TEV Sales EBITDA
- Date
- Target
- Acquirer
- Company
- Financials
11/16/16 Gardner Aerospace 10/04/16 Airwork Holdings 07/15/16 SR Technics Switzerland 04/11/16 Gategroup Holding 01/12/16 Aritex Cading
$406 $314
–
2.2x 2.6x
–
–
6.2x
–
Chengdu Aerospace Superalloy Technology
•••
China Aviation Planning and Design Institute
(US$342M) – Provides technical consultation
services to the A&D industry Tainjin Aviation Mechanical and Electrical (US$115M) – Develops and manufactures secondary power and fireproofing systems Aritex Cading (US$108) – Manufactures production and assembly lines for aeronautic companies
Zhejiang Rifa Holding Group
Sales: $56,537 EBITDA: $5,265 Cash: $14,634
HNA Aviarion Group
$1.923
$124
–
- 0.6x 13.5x
- HNA Group
––––
––––
AVIC International
•••
SR Technics – Provides MRO services for the civil aviation sector Gategroup Holding (US$1,923) – Provides airline catering and provisioning services worldwide Asia Jet Partners – Offers aircraft management, on demand charters, jet card membership, and consultancy services
11/23/15 AIM Aviation
AVIC Aerospace
International
Sales: $15,547 EBITDA: $2,730 Cash: $17,549
04/05/15 Danbury Aerospace
12/05/14 Align Aerospace
–
Continental Motors (AVIC International)
–
AVIC International
10/23/13 TIMCO Aviation Services 01/03/13 Enstrom Helicopter Corp. 02/28/11 Cirrus Design Corp.
Sources: CapIQ, Dacis, Deloitte, NY Times
$393
$60
$210
- 1.1x 13.4x
- Hong Kong Aircraft
Engineering Company
••
TIMCO Aviation Services (US$393) – Aircraft MRO provider to commercial, government and private customers GE Engine Services Xiamen (US$43) – Provides MRO and aviation services for engine operators
Sales: $1,775 EBITDA: $140 Cash: $168
––
––
Chongqing Helicopter Investment China Aviation Industry General Aircraft
- John Zhang
- Angela Chen
Principal
+86-138-1613-2926 [email protected]
Stephen Perry
Managing Director (949) 769-3323 x302 [email protected]
Alyssa Morrisroe
Managing Director (949) 769-3323 x306
Ilana Germaine
Vice President
(949) 769-3323 x308 [email protected]
Paul Liang
Managing Director +86-21-5012-0990 [email protected]
Principal
+86-138-1736-9958
Aerospace & Defense Market Insights
Country Overview | 2017
India Aerospace & Defense Overview
The Indian aerospace and defense (A&D) industry is one of the fastest growing A&D industries worldwide. The Indian aerospace industry, an approximate US$16 billion market, currently ranks in the global top 10 aerospace industries and is predicted to become the third largest aviation market by 2026. As the A&D market continues to increase, India will require 1,850 new commercial aircraft worth US$265 billion, over the next two decades. The robust expansion in commercial aviation creates similar augmentation within the A&D supply chain subsectors, particularly within the maintenance, repair and overhaul market
(MRO). The Indian government aims to continue expanding the MRO industry by offering exemptions on paying customs duty, airport royalties, value-added
taxes and ensuring adequate land available for MRO service centers. The Indian defense industry also continues to expand quickly. The Indian defense sector budget (US$50.7 billion) became the fourth largest global defense budget in the world and will continue to grow to US$56.5 billion by 2018 as the country seeks to bolster its military. The Indian government offers several policy initiatives aimed at strengthening the local defense industry. In 2016, the Indian government removed regulations barring foreign A&D firms from holding more than a 49.0% stake in local ventures. This relaxation of FDI regulations will assist India in becoming a key A&D manufacturing hub. The easing of regulations also spurred Boeing to announce, in November 2016, plans to invest in a factory to produce the F/A-18 Super Hornet fighter jet. Additionally, reports exist of Lockheed Martin’s plan to shift their F-16 production facility to India. As more favorable regulations are introduced, large A&D firms will continue to invest in India’s burgeoning A&D industry.
- Public Comparable Companies
- Hindustan Aeronautics Limited (HAL) Spotlight
($ in US millions)
Market Cap
- LTM
- TEV / LTM LTM EBITDA
Margin
20.9%
Business Description
- TEV
- Revenue EBITDA
HAL produces various aircraft, helicopters and engines and provides MRO services
- Bharat Electronics
- $5,840
$253
$21 $11 $10
$4,530
$337
$25 $11 $15
$1,287
$231
$6
16.6x
Dynamatic Technologies Taneja Aerospace and Aviation Sika Interplant Systems High Energy Batteries
13.2x 17.8x 27.3x 14.4x N/M
10.9% 24.0%
7.6%
14.6%
8.9%
- Select Segments
- Description
$5 $7 $4
• Engaged in manufacturing various space structures
Space
- Kavveri Telecom Products
- $4
- $37
• Offers aircraft, helicopter and power plant MRO
services
MRO
- Mean
- 17.9x
- 14.5%
• Manufactures five various military aircraft
Aircraft
Trading metrics as of 6/19/17. Valuation multiples based on LTM financial data as of 3/31/17
- Select Recent A&D Transactions
- Select Indian Company Profiles
($ in US millions )
TEV / TEV /
- Company
- Commentary/Investments
- Date
- Target
- Acquirer
- TEV Sales EBITDA
••
Manufactures and supplies electronic products for the defense sector Offers communication, radars, naval systems, opto electronics, electronic warfare systems, weapon system, tank electronics and simulators products
08/14/15 India Aviation Training
Institute
- $41
- 1.3x
–
–––––––––––
AXISCADES Engineering Technologies
06/26/14 Thales Software India
–
L&T Technology Services
02/06/14 Deepti Electionics &
Electro-Optics
- –
- –
Global Strategic Technologies
••
Offers aerospace components, assemblies and aircrafts Defense Land Systems India (2013) – manufactures purpose built special military vehicles
- 07/09/13 Sansera Engineering
- $57
