ALEXANDRIA, Va. - VSE Corporation (NASDAQ:VSEC), a prominent aftermarket distribution and repair services provider, has announced a definitive agreement to acquire Kellstrom Aerospace Group, Inc., a global distributor and service provider in the commercial aerospace engine aftermarket. The $200 million transaction, subject to regulatory review, is expected to close in Q4 2024.
John Cuomo, President and CEO of VSE Corporation, described the acquisition as a significant milestone, enhancing the company's position in the aviation aftermarket. The deal is set to increase VSE's involvement in aircraft engine maintenance, a rapidly expanding sector.
Ben Thomas, President of VSE Aviation, highlighted the expected synergies, including sales and operating benefits. Kellstrom's technical advisory capabilities and OEM-centric approach are seen as highly complementary to VSE Aviation's business.
Oscar Torres, President and CEO of Kellstrom Aerospace, expressed enthusiasm for the merger, anticipating an expanded product and service offering for customers worldwide.
Kellstrom's alignment with VSE Aviation's growth strategy includes increasing exposure to the commercial aerospace engine aftermarket, aligning with VSE's OEM-centric strategy, expanding international reach, and presenting significant synergies with full integration planned.
Financially, Kellstrom reported approximately $175 million in revenue over the last twelve months through August 2024. The acquisition is expected to be funded through equity financing and borrowings under VSE's existing credit facility. Post-acquisition, VSE anticipates a Pro Forma Net Leverage Ratio of less than 3.5x as of 3Q 2024.
VSE Corporation's preliminary third-quarter financial results for 2024 show revenues ranging from $268 to $275 million and operating income between $22 and $24 million. Adjusted EBITDA is estimated at $31 to $34 million.
VSE will discuss the financial results and recent events in a conference call on Wednesday, November 6, 2024.
The information in this article is based on a press release statement.
In other recent news, VSE Corporation reported impressive Q2 results, with a 30% increase in revenue primarily driven by the Aviation segment's record revenue and profitability. Jefferies initiated coverage on the company with a Buy rating and a $100 price target, citing the company's potential for above-market growth. The firm noted VSE's product and service differentiation, as well as its successful mergers and acquisitions strategy, as key growth drivers.
VSE's Aviation segment is expected to deliver a 15% organic Aviation Compound Annual Growth Rate (CAGR), challenging the market's 5-6% rate. The company is also expected to introduce over 100 new parts in 2024, which is anticipated to further fuel growth. Despite a decline in the Fleet segment's revenue, largely due to lower USPS revenue, the company is exploring strategic alternatives for this segment.
VSE Corporation also successfully completed an equity offering and expects to appoint a new permanent CFO soon. For Q2, the company reported total revenue of $266 million and adjusted EBITDA of $31 million. These recent developments reflect VSE's strategic focus on integrating acquisitions, scaling the commercial fleet business, and generating solid free cash flow.
InvestingPro Insights
VSE Corporation's acquisition of Kellstrom Aerospace Group aligns well with the company's recent financial performance and market position. According to InvestingPro data, VSE has demonstrated strong revenue growth, with a 32.87% increase in the last twelve months as of Q2 2024. This growth trajectory is expected to continue, as one of the InvestingPro Tips indicates that analysts anticipate sales growth in the current year.
The $200 million acquisition price tag for Kellstrom is significant when compared to VSE's market capitalization of $1.65 billion. However, VSE's financial health appears robust, with InvestingPro data showing that liquid assets exceed short-term obligations. This suggests that the company is well-positioned to manage the acquisition and its associated costs.
Investors should note that VSE has maintained dividend payments for 47 consecutive years, as highlighted by an InvestingPro Tip. This long-standing commitment to shareholder returns, combined with the company's high return over the last year and decade, may provide additional confidence in VSE's strategic decisions and financial management.
For those seeking a deeper understanding of VSE's financial position and growth prospects, InvestingPro offers 11 additional tips that could provide valuable insights for investment decisions.
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