Precision Castparts Deal Targets Airbus, Boeing Production Gain

Precision Castparts Corp.'s $900 million purchase of aerospace supplier Primus International may yield higher earnings growth as customers Boeing Co. and Airbus SAS ramp up production of commercial jets.

Primus makes parts for jets including Airbus's A320 family and Boeing's 737, which compete in the biggest commercial plane market. Both Airbus and Boeing said they are boosting output this year to work off high order backlogs.

“Similar deals will be seen down the road for Precision and its peers as airframers continue efforts to reduce the number of vendors dealt with,” Stephen Levenson, a New York- based analyst with Stifel Nicolaus, said today in a note to clients. He has a “buy” rating on the stock.

The agreement to purchase Primus from private-equity firm Oak Hill Capital Partners is the fifth acquisition that Portland, Oregon-based Precision Castparts has announced this year.

The company agreed in June to buy both the rings operation unit of General Electric Co.'s Unison Engine Components, which makes equipment for jet engines and gas turbines, and PB Fasteners, which supplies parts for planes including Boeing's composite-plastic 787 Dreamliner.

Any acquisition must be an “expansion of what our product offering is,” Precision Castparts Chief Executive Officer Mark Donegan said in May.

The deal comes as Chicago-based Boeing plans to boost output of the narrow-body 737 by 33 percent, to 42 a month, and Toulouse, France-based Airbus ramps up production of the rival A320 to 42 a month from 36.

Precision Castparts announced the acquisition seven months after an unsuccessful attempt to buy aircraft-parts supplier McKechnie Aerospace Holdings Inc., which was purchased by TransDigm Group Inc. for about $1.27 billion in December.

‘Respond Positively'

Primus' production of components, passenger and exit doors and flight-control assemblies will expand Precision Castparts' existing airframe business, reaching a market similar to the one the company attempted to gain with McKechnie.

The $900 million cash purchase of Bellevue, Washington- based Primus, expected to be completed in the third quarter of 2011, will add to earnings immediately, Precision Castparts said in a statement yesterday.

“This is the major acquisition that investors had expected,” Robert Stallard, a New York-based analyst with RBC Capital Markets, said in a note to clients. He recommends buying the shares. “Investors will respond positively to this deal and the potential for further bolt-ons.”

Precision Castparts fell 52 cents to $162.27 at 1:53 p.m. in New York Stock Exchange composite trading, after climbing as much as 1.2 percent to $164.78 earlier.