Astronics Corp. has agreed to spend $136 million to buy PECO, an Oregon company that makes the aircraft cabin lighting and air flow components located above passenger seats.
The cash deal, expected to close in late June or early July, will expand the array of products that Astronics makes for commercial aircraft and greatly increase the amount of business that it does directly with Boeing Co., one of the two major manufacturers of commercial jets.
“We think the product lines are complementary,” said Peter Gundermann, president and CEO of the East Aurora aircraft lighting and cabin electronics manufacturer. “Together, we have a stronger presence in aircraft cabins.”
Most of Astronics’ business comes from cabin electronics systems that allow passengers to plug their electronic devices into their seats, along with exterior aircraft lighting systems.
PECO gets about 75 percent of its aerospace sales from passenger service units, which allow airline passengers to control the air flow and turn on lights above their seats, while also providing emergency oxygen supplies. The remaining quarter of PECO’s aerospace business comes from fuel access doors that are located on the wings of the airplane and allow access to the fuel tanks and other electronic systems located within the wing.
“PECO’s products are complementary to ours, but separate,” Gundermann said during a conference call with analysts on Wednesday.
PECO, based in Portland, Ore., has about 240 employees and had $77.8 million in sales last year. PECO’s sales are expected to rise by about 7 percent this year to around $83 million, Gundermann said. While Astronics did not disclose PECO’s profits, Gundermann said its operating profit margins are around 20 percent, which is comparable with Astronics’ overall profitability.
“It’s a well-run company,” he said. “This is not a turnaround.”
Gundermann said Astronics expects PECO’s management to stay with the company. He also said he is not planning to make significant changes in PECO’s operations.
“I think we are inclined to let it run as it’s been running,” Gundermann said. “I think we have a pretty well-running business, and the most important thing is not to screw it up.”
Most of PECO’s systems are sold to Boeing, especially for its 737, 777 and 787 commercial jets. PECO gets about 65 percent of its sales – around $50 million in all – from Boeing, Gundermann said. PECO has about $200,000 in equipment on each 777 aircraft, he said.
“We should benefit from having a closer relationship with Boeing through PECO,” said Gundermann, who noted that Astronics has been invited by Boeing to bid on a variety of projects in the past but met with little success.
PECO also gets about 10 percent of its total sales from a line of products used in the defense and medical markets. While those products are outside of the aerospace markets that provide nearly all of Astronics’ sales, Gundermann said the company does not have any current plans to divest those product lines.
Gundermann said Astronics began looking at PECO after the Oregon company’s long-time owners hired an investment banker to seek a buyer.
“I think they are at the point where they were looking to divest themselves of the business,” he said. “It was a competitive situation.”