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Esterline Technologies Corporation (ESL) Buys Back Shares From Relational Investors

In a new filing with the U.S. Securities and Exchange Commission, Relational Investors, led by Ralph V. Whitworth, disclosed reducing its stake in Esterline Technologies Corporation (NYSE:ESL). According to the filing, Esterline Technologies Corporation (NYSE:ESL) acquired more than 688,885 shares from Relational under a stock repurchase agreement. Following the sale, which was completed yesterday, Relational Investors now holds 1.46 million Esterline shares, representing 4.75% of the company’s common stock. At the end of March, Relational Investors held 2.48 million shares of Esterline Technologies Corporation (NYSE:ESL), indicating the fund also sold about 332,000 shares of the company separately since March 31. Esterline Technologies Corporation (NYSE:ESL) is a specialty manufacturer serving global aerospace and defense markets.

Ralph V. Whitworth

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Founded in 1996, Relational Investors uses rigorous research to identify undervalued companies. It strives to engage the management and board of the target companies in a constructive dialogue to increase shareholder value. Relational Investors has about $2.87 billion in assets under management (AUM), while the market value of its public equity portfolio stood at $2.38 billion at the end of the first quarter of 2015. The fund’s top holdings consisted of Mondelez International Inc (NASDAQ:MDLZ), Hologic Inc. (NASDAQ:HOLX), and Bunge Ltd (NYSE:BG).

Ralph V. Whitworth
Ralph V. Whitworth
Relational Investors

Esterline Technologies Corporation (NYSE:ESL) is a maker of engineered products and systems for aerospace and defense customers. It has a market cap of $2.89 billion. On July 6, Esterline Technologies Corporation (NYSE:ESL) entered into a stock repurchase agreement with Relational Investors and certain of its affiliates. Under the agreement, Esterline Technologies Corporation (NYSE:ESL) acquired 688,885 common shares from Relational at $92.65 per share, for a total purchase price of about $64 million. The purchase price represents a 2.5% discount from the volume weighted average of the closing price of Esterline’s common shares on the New York Stock Exchange on the five consecutive trading days ending on and including July 6, 2015, Esterline said in a statement. The shares were purchased by Esterline Technologies Corporation (NYSE:ESL) as part of its current share repurchase program. The purchase was funded by the company using a combination of cash on hand and short-term borrowing under its existing credit facility.

For the fiscal second quarter ended May 1, Esterline Technologies Corporation (NYSE:ESL)’s sales from continuing operations decreased to $500.1 million, versus $510.9 million in the same period last year. It reported earnings from continuing operations of $21.6 million, or $0.69 per diluted share, versus $40.6 million, or $1.25 per diluted share, in the same quarter of 2014.

Last month, Esterline Technologies Corporation (NYSE:ESL) reported that it finalized a long-term supply agreement with United Technologies Corporation (NYSE:UTX) to support production at UTC’s aerospace businesses. The UTV2 long-term supply agreement secures contracts for critical engineered items required by UTC at its aerospace business units, Pratt & Whitney, Sikorsky, and UTC Aerospace Systems, on key programs including E2, MRJ, S-92, A350, and B787. In addition, Esterline Technologies Corporation (NYSE:ESL) said in a statement that it is actively engaged in the UTC Supplier Gold program and committed to the UTV2 cost-savings initiative and UTC Contract Governance program, which sets high standards for quality and on-time delivery.

Shares of Esterline Technologies Corporation (NYSE:ESL) have not been showing impressive performance, declining by 17.07% year-to-date (YTD). The stock has also dropped by 19.84% during the past year, compared to an industry average gain of 17.55%. Other investors with heavy stakes in the company include Glenn Fuhrman and John Phelan’s MSD Capital, and Siddharth Thacker’s Signpost Capital, holding 1.62 million shares and 323,009 shares respectively, as of March 31.

Disclosure: None

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