- Woodward and Hexcel Announce Merger of Equals to Create a Premier Integrated Systems Provider Propelling the Future of Flight and Energy EfficiencyTransformative combination brings together a broad, unparalleled portfolio of leadingedge technologies enabling smarter, cleaner and safer solutions for customers across aerospace and industrial markets, with significant content on all key aerospace programs.
- Enhances scale and creates a premier independent aerospace and defense supplier with more than $5 billion in revenue, industry-leading EBITDA margins, and approximately $1 billion of free cash flow in the first full fiscal year.
- Accelerates innovation and growth through combined R&D capabilities to deliver advanced solutions to support customer needs for improved aerodynamics, energy efficiency, safety, and lower-emission technologies.
- Compelling value creation for shareholders with more than $125 million of annual cost synergies expected to be realized by the second full fiscal year post-closing, as well as opportunities for enhanced revenue growth and consistently growing cash flows across program lifecycles.
- Strong balance sheet with financial profile at closing consistent with investment grade rating metrics and approximately $1.5 billion of capital expected to be returned to shareholders within 18 months of merger completion.
Woodward, Inc. (NASDAQ: WWD) and Hexcel Corporation (NYSE: HXL) announced a definitive agreement to combine in an all-stock merger of equals to create a premier integrated systems provider serving the aerospace and industrial sectors. The combined company will focus on technology-rich innovations to deliver smarter, cleaner, and safer customer solutions.
Under the terms of the agreement approved by the Boards of Directors of both companies, Hexcel shareholders will receive a fixed exchange ratio of 0.625 shares of Woodward common stock for each share of Hexcel common stock, and Woodward shareholders will continue to own the same number of shares of common stock in the combined company as they do immediately prior to the closing. The exchange ratio is consistent with the 30-day average share prices of both companies. Upon completion of the merger, existing Woodward shareholders will own approximately 55% and existing Hexcel shareholders will own approximately 45% of the combined company on a fully diluted basis. In connection with the transaction, Woodward is increasing its quarterly cash dividend to $0.28 a share. The merger is expected to be tax free for U.S. federal income tax purposes.
The combined company, to be named Woodward Hexcel, will be among the top independent aerospace and defense suppliers globally by revenue. It will have more than 16,000 employees, manufacturing operations in 14 countries on five continents, and a diversified customer base across multiple markets. For each company’s respective fiscal year 2019 on a pro forma basis, the combined company is expected to generate net revenues of approximately $5.3 billion and EBITDA of $1.1 billion, or a 21% EBITDA margin.
Nick Stanage, Chairman, Chief Executive Officer and President of Hexcel, will serve as Chief Executive Officer of the combined company. Tom Gendron, Chairman, Chief Executive Officer and President of Woodward, will serve as Executive Chairman of the combined company until the first anniversary of the closing of the merger, at which time Mr. Gendron intends to retire from the company and will then serve as non-executive Chairman of the combined company until the second anniversary of the merger close. At that point, Mr. Stanage will assume the role of Chairman of the Board in addition to his CEO responsibilities. The combined company’s Board of Directors will have 10 members, consisting of five directors from each company, including Mr. Gendron and Mr. Stanage.
Mr. Gendron said, “Our two companies are each independently working toward addressing the sustainability and efficiency needs of our customers. This merger accelerates our technology investments and creates greater benefits and growth opportunities than either company could have achieved alone. Both Woodward and Hexcel have attractive growth trajectories, with strong aftermarket positions and increased composite penetration driving our respective outlooks. Our complementary cultures and shared commitment to operational excellence and customer satisfaction, together with our enhanced financial strength, will position us to better serve our OEM and aftermarket customers. We will be stronger together and are committed to delivering even greater value to all our stakeholders.”
Mr. Stanage said, “The future of flight and energy efficiency will be defined by next-generation platforms delivering lower cost of ownership, reduced emissions, and enhanced safety – and a combined Hexcel and Woodward will be at the forefront of this evolution. Woodward’s innovative control systems and Hexcel’s advanced lightweight materials are designed to drive improved reliability, efficiency, and emissions. Through our combined scale and strong cash flow profile, we will be even better positioned to accelerate innovation in aerodynamics and propulsion efficiencies and support evolving customer needs. I am incredibly excited about what we can accomplish by uniting these two premier companies and world-class teams with similar values, cultures, and operating philosophies.”
