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ST Engineering to acquire GE's nacelle unit

GE Aviation is to divest its Middle River Aircraft Systems nacelle division to ST Engineering.

The Singaporean group says its US subsidiary, Vision Technologies Aerospace, will acquire all the shares of MRAS for a "base purchase price" of $630 million.

Adjusted for items including "underfunded" pension obligations, other debt-like items, transaction expenses and net working capital, the net price for the deal has been estimated at $440 million, ST Engineering says.

Based in Baltimore, Maryland, MRAS specialises in the development, production and aftermarket support of nacelles, thrust reversers and aerostructures and employs around 800 staff.

The company is the sole supplier of certain nacelle equipment for GE engines powering the Airbus A330, Boeing 747-8, 767, Comac ARJ21 and Embraer 190.

As a partner of Safran – the sole nacelle supplier for the CFM International Leap-1A, an option on the A320neo – MRAS supplies thrust reversers and other components for that nacelle.

ST Engineering describes the Leap-1A nacelle activity as a key programme for MRAS and forecasts the supplier's production output will grow by 40-50% from current levels.

MRAS is "well positioned" for growth opportunities, both in the line-fit and aftermarket business, says ST Engineering.

Together with Safran, MRAS has a joint venture, Nexcelle, which is responsible for entire nacelles on the Leap-1C – an option on the under-development Comac C919 – and GE's Passport engine, employed on Bombardier's Global 7500 business jet.

Nexcelle will not be affected by the divestiture as ST Engineering "will take over the role of MRAS", the Singaporean group says.

Noting a range of patents and other intellectual property owned by MRAS, ST Engineering says the US supplier represents a "strong fit" for its business and is central to an effort to expand its traditional maintenance-based aerospace activities to the manufacturing arena.

ST Engineering's divisional aerospace president, Lim Serh Ghee, says: "Moving upstream into the business of design and manufacturing of nacelles will allow us to benefit directly from the robust growth of the global aircraft fleet as an OEM."

During the six months ended 30 June 2018, MRAS generated a $24 million net profit, the Singaporean group says.

ST Engineering president and chief executive Vincent Chong states the group is on a "constant lookout to acquire companies in our core business areas or adjacencies that will contribute profitable revenue streams and sharpen our competitive edge".

He describes MRAS as a "high-value and complementary business that will enhance our scale, global reach and capture synergies for the group".

ST Engineering sees "no compelling reason at this point" to evaluate a potential expansion of MRAS's footprint beyond its Baltimore base, the group says. But it adds that it will "explore opportunities to optimise" the US company's production and supply chain.

Following the divestiture, MRAS will remain "an important supplier of nacelles on our propulsion systems for many years to come", says GE Aircraft Engines president and chief executive David Joyce.

The acquisition is scheduled to be completed by end of first quarter 2019.

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