The Bellevue based aerospace producer and defense equipment manufacturer with almost thousand employees was sold to the TransDigm group at a price of $4 billion in cash, said the company recently. This deal was expected to get close by next year’s second half, which was recently in wave of the mergers between the aerospace suppliers because they can get larger and receive more leverage during negotiations held with the biggest manufacturers. By considering the aerospace conference held on Wednesday at Lynnwood, the VP of strategic management, Andy Buchan said that primes like Airbus and Boeing are called as OEMs in the business jargon, come together to form a stronger alliance throughout this industry.
The continuous pressure of price is led by the OEMs, says Buchan. This kind of merger is natural business cycle where everyone wants to be competitive. The Boeing, which is one of the largest customers of Esterline, has been continuously squeezing its suppliers in order to lower their prices for many years. During the conference of Aerospace Alliance, President of Meridian Capital, Brian Murphy emphasized the role of Boeing in the industry wide transformation.
The burden on the suppliers is making a shift from independently owned smaller companies towards the bigger companies having greater resources which can meet demands of Boeing. Esterline has been pressurized by its investors due to its financial instability, which will be bought at $122.50/share, which shows a premium of 38 percent to the share price of Esterline. The largest but low-profile company has workforce of about 13000 globally at 50 different locations, due to their acquisitions. The larger plants are located at Kent and Everett, having hundred employees at Bellevue headquarters. TransDigm said it wants to retain workforce and their skills which made Esterline so successful. An analyst suggested that TransDigm wants to dispose non aerospace Esterline units situated in the state of Washington.
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