- GE Aerospace agreed to acquire Consolidated Precision Products (CPP) for around $12 billion, its largest deal since becoming a standalone publicly traded company.
- CPP supplies precision castings for GE's LEAP and GEnx engines, and GE plans to raise output by improving factory yields and machine use.
- GE values CPP at about 26 times expected 2027 EBITDA before net synergies, funding the deal with cash on hand and debt.
- GE's backlog exceeded $210 billion, including more than $170 billion in commercial services, but the deal depends on converting added capacity into free cash flow.
- The bear case is that CPP fails to remove enough production constraint to justify the premium, leaving GE with more debt without sufficient cash flow.
Quotes
“GE Aerospace (NYSE:GE) is making its largest acquisition since becoming a standalone publicly traded company.”
“The strongest bear case is therefore not that GE lacks demand. It is that CPP fails to remove enough of the production constraint to justify the premium GE is paying for it.”