Consolidation is coming in the cabin components industry with Astronics announcing this morning that it will acquire Telefonix for $104mm in cash. The two companies’ product lines are largely complementary, covering in-seat power, passenger service units, seat actuators, inflight connectivity components and more. Astronics expects the acquisition to close before the end of the calendar year and will fund the purchase with an existing credit facility.
“We believe Telefonix is an excellent strategic fit with Astronics. Telefonix is a leader in the critical equipment it designs and manufactures and has successfully established itself with an impressive set of aerospace customers. We believe that Astronics will be able to both strengthen and benefit from the technology and relationships that Telefonix brings to our company,” stated Peter J. Gundermann, President and CEO of Astronics. “We welcome the Telefonix team to Astronics. We are confident the combination of world-class capabilities from both organizations will serve to further our mutual goals.”
There is some overlap in the companies’ output but the two product suites should combine well to allow the new Astronics to deliver a better end-to-end suite of solutions for airline and business jet customers. The bulk of Astronics’ revenue today comes from the company’s in-seat power and motion/actuator (the bits that make premium cabin seats move) lines. Passenger service units and interior lighting are a smaller portion of the business. Integrating Telefonix into the business will bolster the inflight connectivity hardware business and support other, smaller areas where inflight entertainment system components are sourced.
The combined inflight connectivity solutions offerings may be the most interesting angle of the transaction. Astronics has an existing business in radome and mounting plate hardware for satellite-based connectivity solutions, as well as VVIP jet antenna manufacturing through its AeroSat operation. Telefonix brings a strong position in cabin access points, on-board servers and control units to the table. That combination delivers a more complete end-to-end offering that should help Astronics to better bid and deliver on solutions across the business aviation and commercial segments.
A Power Play, too
The announcement today is the second big piece of news from Astronics this month; two weeks ago the company “announced” deals with multiple major US airlines to equip up to 1400 single-aisle aircraft “with 110VAC and high output USB power for every passenger from ‘nose to tail,’ including the cabin crew stations. Line-fit and retrofit installations will occur from early 2018 through 2023.” That announcement was light on specific details but the market reacted positively, giving the company’s shares a quick 10% boost.
The power announcement is a positive indicator for revenue, something Astronics needed after missing its earnings numbers three of the last four quarters. Specific details of how many aircraft of what size and which specific airlines remain private but a company spokesperson noted that recent major cabin retrofit announcements from Alaska Airlines, American Airlines and JetBlue would include Astronics power components. That the deal includes both line-fit and retrofit work is a positive development for the company. It is also good news for travelers as getting power into the North American narrow-body and regional jet market is especially valuable given the longer-than-average stage lengths those planes fly. A commitment from the US carriers to deliver such is welcome news.
The form and timing of the power announcement remains slightly questionable as it appears more a reminder of pending orders than an announcement of new orders. Airlines are often reluctant to explicitly announce supplier contracts so this approach is often the only way it can be done. And the “pep talk” worked, with the implied projected revenue numbers – anywhere from $80-150mm depending on which specific aircraft and how many are fitted – across the 2018-2023 timeframe seen as very, very positive for the company.