Woodward and Hexcel Announce Merger

In a deal that appears mostly targeted at the aerospace markets, Woodward, Inc., Fort Collins, Colo. and Hexcel Corp., Stamford Conn., have announced a definitive agreement to combine in an all-stock merger that the two companies are calling “a merger equals” to create an integrated systems provider serving the aerospace and industrial sectors.

The combined company, to be named Woodward Hexcel, will reportedly be among the top independent aerospace and defense suppliers globally by revenue. It will have more than 16,000 employees and manufacturing operations in 14 countries on five continents.

The transaction is subject to the approval of the shareholders of both Woodward and Hexcel, as well as other customary closing conditions, including required regulatory approvals. The parties expect the merger to close in the third calendar quarter of 2020, subject to satisfaction of these conditions. Headquarters and the transition team for Woodward Hexcel will be in Fort Collins.

For each company’s respective fiscal year 2019 on a pro forma basis, the combined company is expected to generate net revenues of approximately $5.3 billion and EBITDA of $1.1 billion, or a 21% EBITDA margin.

Not much was discussed about what this means for the industrial side of Woodward, which includes systems and components that provide control for steam and gas turbines, diesel and reciprocating engines, and compressors, along with integral safety systems. The announcement did say the combined industrial revenues of the two companies was about $1.9 billion.

Nick Stanage, chairman, chief executive officer and president of Hexcel, will serve as chief executive officer of the combined company. Prior to joining Hexcel, Stanage was president of the Heavy Vehicle Products group (including both Commercial Vehicle Products and Off Highway Products) at Dana Holding Corp. from December 2005 to October 2009 and served as vice president and general manager of the Commercial Vehicle Group at Dana.

Tom Gendron, chairman, chief executive officer and president of Woodward, will serve as executive chairman of the combined company until the first anniversary of the closing of the merger, at which time Gendron intends to retire from the company and will then serve as non-executive chairman of the combined company until the second anniversary of the merger close. At that point, Stanage will assume the role of chairman of the board in addition to his CEO responsibilities.

Upon completion of the merger, existing Woodward shareholders will own approximately 55% and existing Hexcel shareholders will own approximately 45% of the combined company on a fully diluted basis.