AAR has entered into a definitive agreement with Triumph Group to purchase MRO service provider, Triumph Product Support for $725 million in cash.
As part of the transaction, AAR expects to receive estimated tax benefits with a present value of approximately $80 million. Including the estimated tax benefits, the effective purchase price multiple is expected to be 11.7x FY2024 EBITDA and 9.9x including estimated run-rate synergies of $10 million.
Triumph Product Support services commercial and military aftermarkets across five primary locations with a workforce of over 700. In its fiscal year ending March 31, 2024, it will reportedly generate around $280 million of revenue and $55 million of EBITDA, representing an EBITDA margin of 20%.
This highly strategic acquisition will deepen and broaden our customer relationships globally and expand our footprint,” said AAR president and CEO John M. Holmes. “Furthermore, the addition of this high-margin business is expected to further increase our operating margin and is expected to be accretive to our earnings.”
AAR intends for permanent financing to include a mix of debt and equity to maintain a strong balance sheet to support future growth. AAR will target pro forma net leverage to be approximately 3.0x at closing, inclusive of a potential equity issuance subject to market conditions. The company expects strong combined free cash flow to enable further deleveraging.
The transaction is expected to close in the first quarter of the 2024 calendar year.