RADNOR, PA — Triumph Group, Inc. (NYSE: TGI) recently announced a definitive agreement to sell its Product Support business to AAR Corp. (NYSE: AIR) in a deal valued at $725 million. This transaction, which represents a 14.5x trailing 12 months Adjusted EBITDAP multiple as of September 30, 2023, is expected to significantly reduce Triumph’s debt.
The Product Support business, a leader in the Maintenance, Repair and Overhaul (MRO) sector, generated revenues of approximately $268 million for the trailing 12 months ended September 30, 2023. Operating across five primary locations, the business provides services to both commercial and military aftermarkets, specializing in the MRO of structures and airframe and engine accessories.
Dan Crowley, Triumph’s Chairman, President, and Chief Executive Officer, expressed enthusiasm about the agreement. “This transaction creates a win-win-win arrangement between Triumph, AAR, and our customers,” he said. “By strengthening our balance sheet and focusing on our OEM component, spares and IP-based aftermarket business, Triumph will further improve its capacity to win and profitably grow in the expanding markets we serve.”
Upon completion of the transaction, Triumph plans to concentrate on four pure play engineered systems components and aftermarket companies focused on Actuation Products and Services, Systems Electronics and Controls, Geared Solutions and Interiors. The company will continue to leverage its intellectual property, with over 60% of the company’s products and services being based on Triumph intellectual property and 90% supplied on a sole-sourced basis.
The transaction, subject to customary closing conditions including receipt of certain regulatory approvals, is expected to close in the first quarter of 2024. Triumph anticipates net after-tax proceeds of approximately $700 million, leading to pro forma net leverage of approximately 4.0x net debt to Adjusted EBITDAP as of March 2024.
Goldman Sachs is acting as financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel on the transaction to Triumph. The company plans to provide an updated outlook during their upcoming earnings call in February 2024. As Triumph moves forward with this significant divestiture, investors in both Triumph and AAR Corp will be watching closely for the potential impacts on their respective portfolios.
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