Boeing Close To Acquiring Aircraft Parts Firm KLX

Boeing is expected to announce a deal to acquire KLX Inc, an aerospace-parts specialist this week. This is part of the plane maker’s plans to expand into the business of aircraft services. Last year in December KLX Inc disclosed that it had begun a sales process after expressions of interest. Besides Boeing there is at least one PE firm said to be interested in KLX.

The intended acquisition of KLX would be the biggest purchase by Boeing in the ambitious plan by the company’s chief executive officer, Dennis Muilenburg, to triple revenues generated from services to reach a level of $50 billion in the next ten years. Recently Muilenburg disclosed that Boeing Global Services was hunting for deals.

Aircraft-services market

In the aircraft-services market, expected to be worth approximately $2.6 trillion in the next decade per the plane maker, Boeing’s market share is around 7%. Offering services that include training, parts and maintenance typically enjoys higher margins compared to producing weapons systems or aircraft. KLX focuses on selling bearings, fasteners as well as other parts for military, business and commercial jets. The Wellington, Florida-based firm, which also offers logistics services, additionally runs an energy business which provides rental equipment and oil-field services.

This year KLX has forecast sales of approximately $2 billion relative to the $1.75 billion which was generated last years. The firm enjoys margins of about 17% just like the services unit of Boeing. The energy-services unit of KLX generated revenues of $321 million in 2017 and it is unclear whether the plane maker will keep the business.

Sector consolidation

Initially KLX was part of B/E Aerospace, an aircraft-seat maker, before it was spun off four years ago. In 2017 Rockwell Collins acquired B/E Aerospace and now United Technologies Corp is acquiring Rockwell Collins.

This comes in the Boeing announcing that there will be a production increase of the 767 cargo jet in 2020 as the global freighter-aircraft market has staged a strong recovery after a period of a prolonged slump. Besides the bullish outlook with regards to commercial jets, the plane maker also has a rosy outlook for the defense unit. According to Muilenburg Boeing expects to deliver 18 KC-46 tankers to the U.S. Air Force before this year ends. Muilenburg is also hopeful that the United States and China, which takes 25% of the production output of Boeing, will not kick off a trade war.

“We’re hopeful for a positive outcome from the discussions between the U.S. and China,” said

 

 

 

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