General Electric Company (GE), TransDigm Group Incorporated (TDG), Honeywell International Inc. (HON): Offloading This Division Could Be a Boon for This Aerospace Company

Benefits and Drawbacks

This deal has some obvious benefits for TransDigm. For starters, its operations are sure to complement TransDigm’s existing aviation actuation activities. Over the past few quarters, the company has aggressively pursued aviation firms that produce standardized components for use in commercial and military aircraft. In fact, this acquisition is smaller than TransDigm’s $286 million purchase of Arkwin Industries in early 2013. It complements a yet-to-be-completed buyout of the much-smaller Aerosonic Corporation. That deal has been valued at about $39 million. TransDigm also looks to benefit from Whippany’s impressive roster of aftermarket clients. The company’s management team has made no secret of its desire to turn TransDigm Group Incorporated (NYSE:TDG) into the leading provider of aftermarket aviation parts.

For its part, GE has decided that this division has outlived its usefulness. Although it would be highly unlikely for GE to make a major move to divest from its aircraft businesses, the company has long been a hodgepodge of seemingly random divisions. Regardless of its long-term strategy, its decision to offload this property suggests that GE cares about pursuing organic growth and delivering value to its shareholders.

Long-Term Outlook and Ways to Play

Although General Electric Company (NYSE:GE) is a blue-chip stock with an excellent track record and a stable outlook, it might not offer investors the best chance to earn a profit from this deal. Given the obvious synergies that TransDigm will realize from this acquisition, it looks to offer long-side investors a better deal. In addition, the company has made some noises about issuing a special dividend with a total value of up to $1.8 billion in the near future. If this pans out, TransDigm longs could have an additional reason to feel good about their holdings.

The article Offloading This Division Could Be a Boon for This Aerospace Company originally appeared on Fool.com and is written by Mike Thiessen.

Mike Thiessen has no position in any stocks mentioned. The Motley Fool recommends TransDigm Group (NYSE:TDG). The Motley Fool owns shares of General Electric (NYSE:GE) Company. Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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