Why Aerospace Company Triumph Shares Are Skyrocketing Today
Portfolio Pulse from Akanksha Bakshi
Triumph Group, Inc. (NYSE:TGI) is selling its Product Support business to AAR Corp. (NYSE:AIR) for $725 million. The deal is valued at a 14.5x EBITDAP multiple based on trailing 12 months as of September 30, 2023. Triumph plans to use the proceeds for debt reduction, targeting a net leverage of 4.0x by March 2024. AAR expects the acquisition to be accretive to earnings, with tax benefits and synergies reducing the effective purchase price multiple. The Product Support division had revenues of $268 million for the trailing 12 months and is expected to generate $280 million in revenue and $55 million of EBITDA in FY2024. AAR will finance the acquisition with debt and equity, aiming for a pro forma net leverage of 3.0x at closing. TGI shares surged 32.23% to $16.23 following the announcement.
December 21, 2023 | 6:01 pm
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POSITIVE IMPACT
AAR Corp's acquisition of Triumph's Product Support business is expected to be accretive to earnings and includes tax benefits and synergies that improve the effective purchase price multiple. AAR plans to maintain a strong balance sheet post-acquisition.
The acquisition is strategic for AAR, expected to deepen customer relationships and expand its footprint. The anticipated accretion to earnings and the planned financing approach are likely to be viewed positively by investors, potentially leading to a short-term positive impact on AIR's stock price.
CONFIDENCE 85
IMPORTANCE 85
RELEVANCE 90
POSITIVE IMPACT
Triumph Group's divestiture of its Product Support business for $725 million is expected to significantly reduce its debt, with a target net leverage of 4.0x by March 2024. The stock price has already reacted positively, surging 32.23%.
The sale of a significant business unit and the use of proceeds for debt reduction are positive signals for investors, typically leading to an increase in stock price as evidenced by the current surge. The high relevance and importance reflect the magnitude of the transaction for Triumph Group.
CONFIDENCE 90
IMPORTANCE 90
RELEVANCE 100