Diploma to Acquire Peerless Aerospace Fastener in $300M Deal

The London-based distributor said the deal would "significantly" expand its U.S. capacity.

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Screen Shot 2024 03 29 At 1 16 20 PmDiploma PLCLONDON — Diploma PLC, a global value-add distribution group, on Wednesday announced its proposed acquisition of Peerless Aerospace Fastener LLC, a market-leading distributor of specialty fasteners into the U.S. and European aerospace markets for an estimated £236 million ($300 million).

The transaction is expected to be completed in the next few weeks following customary regulatory clearances. 

Peerless is one of the largest independent value-added distributors of aerospace fasteners with a strong reputation for quality and breadth of product, speed to market, and value-add customer service. This customer proposition has driven a long track record of organic growth of about 9% and has enabled a 30% operating margin.  

The acquisition will add to Diploma's established position in aerospace fasteners, extending its capability from aircraft cabin to airframe, accelerating organic growth by significantly expanding its capability in the U.S. with an enhanced product offer, and further penetrating key strategic markets in Europe.

The £236 million value represents a multiple of about 7x FY24 EBIT and a year one ROATCE of 15%, well in excess of our cost of capital. It will be immediately accretive to group growth and operating margin and drive 8% EPS accretion in the first 12 months of ownership.

Aerospace fasteners represents a $7 billion, highly fragmented addressable market. They are highly specialized products and among the most critical components in aircraft manufacturing. An aircraft contains roughly 1 million fasteners, representing up to 5% of total aircraft build value. There is currently a 10-plus year backlog for commercial aircraft manufacturing, and the combination of new build and ongoing maintenance supports sustainable long-term market growth. Diploma has operated successfully in this space for more than a decade through our Clarendon business, which has delivered sustained double digit growth, and to which Peerless is highly complementary.

Peerless, which was founded in 1952 and is headquartered in Farmingdale, New York, is an approved supplier to all major aerospace companies globally, primarily serving about 80 sub-contractors to the principal OEMs. It is a business that Diploma has been tracking, and building a relationship with, for some time.

It demonstrates all of the core characteristics Diploma looks for in acquisitions:

  • Quality value-add business: similar to Clarendon, Peerless' market-leading reputation and value-add is based on product tracking and traceability; scheduled inventory management; customized kitting; and custom, automated VMI solutions. This is reflected in strong operating margins of about 30%.
  • Impressive organic growth track record, exciting potential: the business has delivered long-term organic revenue CAGR of 9% and has significant headroom for continued growth in fragmented markets.
  • Excellent management team: a highly experienced management team, led by Bill Way and Don Russo, has successfully grown the business for over 20 years. There is strong cultural alignment and we are delighted that they will remain with the business under Diploma's ownership within its Controls Sector. 

Johnny Thomson, Diploma's chief executive, said: 

"Peerless is an excellent acquisition for Diploma, aligned to our strategy of building high quality, scalable businesses for sustainable organic growth. Bill, Don and our new Peerless colleagues have created an exceptional value-add business with a very strong market reputation and I am delighted to welcome them to the group. We know and like the aerospace fasteners market and Peerless significantly extends our US capabilities and adds scale in Europe. The business is already generating strong performance and there are significant opportunities to enhance returns by working together across our existing businesses. We expect Peerless to extend our track record of acquisitions that drive organic growth at great returns, as part of our focus on continuing to deliver sustainable quality compounding."

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