Rockwell Collins’ largest acquisition to date—purchasing communications and systems engineering provider, Arinc, for $1.39 billion from the Carlyle Group—will give the avionics maker its own end-to-end communications link between the ground and the flight deck, a connection that is fundamental to the FAA’s Next Generation Air Transportation System (NextGen).
The companies announced the “definitive agreement” for the purchase on Aug. 11, with the deal expected to be finalized within 90 days, marking a grand entrance for new Rockwell Collins CEO Kelly Ortberg, who succeeded Clay Jones on Aug. 1.
Ortberg has said his top priority was restoring sales growth for the avionics provider.
With the Arinc purchase, Rockwell Collins will not only expand its immediate revenue potential by more than 10%, but also increase its commercial-to-military revenue mix from approximately 50% for each sector this year, to 54% commercial and 46% military next year, a key goal for the company in light of declining military sales.
While Arinc is best known as a provider of air-ground digital VHF communications to airliners and business jets through the aircraft communications addressing and reporting system (Acars), the company also is involved in many other aspects of commercial aviation and transportation systems, including flight support services for business aviation; airport communications and information services; maintenance, repair and overhaul (MRO) capabilities; and communications and information services for railroads. Arinc’s GlobaLink Acars services and other products are subscription-based, which Ortberg says also represent a consistent, stable revenue stream not tied to aircraft production rates.
Ortberg says the acquisition will add $600 million “immediately” to Rockwell Collins’ revenues, which before the acquisition were expected to total $4.65 billion for fiscal year 2013, an increase of 13% year-over-year. The company’s fiscal year ends on Sept. 30.
More important for Rockwell Collins are future opportunities for revenue growth with the expected dramatic increase in connectivity between aircraft cabins and cockpits with the ground. As part of the NextGen plan, digital data communications between aircraft and the ground will expand to include real-time routing and weather information, while replacing virtually all vocal transmissions. “There is no doubt the digital information exchange will continue to expand at a rapid rate,” says Ortberg, adding that the acquisition “substantially expands Rockwell Collins’ position in the growing aviation information-management space.”
Ortberg says Arinc’s “trusted network” for flight-critical information will complement Rockwell Collins’ hardware and avionics platforms, leading to a “broader range of solutions.” Along with cockpit avionics, Rockwell Collins builds inflight entertainment systems for narrowbody aircraft.
Near-term, Rockwell Collins is planning an “accelerated expansion” of GlobaLink, developing global weather solutions, “airline trusted application hosting,” and expanded services for business aviation customers.