(CBS4/AP) — Woodward and Hexcel are merging in an all-stock deal that would create one of the largest suppliers in the aerospace and defense industry.
The companies say the tie-up will allow them to create more efficient aircraft that will reduce emissions, a big hurdle for the aerospace industry.
“The future of flight and energy efficiency will be defined by next-generation platforms delivering lower cost of ownership, reduced emissions, and enhanced safety – and a combined Hexcel and Woodward will be at the forefront of this evolution,” Hexcel CEO Nick Stanage said in a prepared statement.
The combined business will be based in Fort Collins, Colorado, where Woodward has its headquarters. Founded in Illinois in 1870 as Woodward Governor, the company entered the aerospace market in 1933 when Elmer Woodward invented the first successful variable-pitch aircraft propeller, as claimed by the company on its website.
It was in 1957 that the company, looking for a presence west of the Mississippi, first built a plant in Fort Collins. It now boasts six facilities in northern Colorado.
Hexcel is based in Stamford, Connecticut.
Hexcel’s stock jumped 9.6% at the opening bell Monday. Shares of Woodward rose 5.1%.
The new company, called Woodward Hexcel, will generate more than $5 billion in annual sales with a market capitalization nearing $14 billion and more than 16,000 employees.
Woodward Hexcel will have manufacturing operations in 14 countries on five continents.
Both companies supply Airbus and Boeing, including parts for the 737 Max. With Boeing ensnared in one if its biggest crisis following the crash of two of its marquee aircraft, industry analysts speculate the deal may have been pushed forward to better position the combined company with Airbus.
“With Airbus’ share of the commercial aerospace market likely to gradually rise, Woodward believes Hexcel’s strong European sales force and Airbus market position should help it rapidly expand its market position,” analyst Nicholas Heymann of William Blair wrote.
The deal is expected to close in the third quarter. It still needs approval from the shareholders of both companies, as well as regulatory approvals.
(© Copyright 2020 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.)