LONDON, UK: Diploma PLC (LON:DPLM), the international value-add distribution group, announced the proposed acquisition of Peerless Aerospace Fastener LLC, a market-leading distributor of specialty fasteners into the US and European aerospace markets for ca. £236m ($300m).
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 ca. 9% and has enabled ca. 30% operating margin.
“The acquisition will add to our established position in aerospace fasteners, extending our capability from aircraft cabin to airframe, accelerating organic growth by significantly expanding our capability in the US with an enhanced product offer and further penetrating key strategic markets in Europe,” a news release noted.
Aerospace fasteners represents a ca. $7 billion, highly fragmented addressable market. They are highly specialised products and amongst the most critical components in aircraft manufacturing. An aircraft contains ca. 1 million fasteners, representing up to 5% of total aircraft build value.
There is currently a 10+ year backlog for commercial aircraft manufacture, 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, NY, is an approved supplier to all major aerospace companies globally, primarily serving ca. 80 sub-contractors to the principal OEMs. It is a business that we have been tracking, and building a relationship with, for some time.
As a quality compounder, Diploma Plc has a long track record of accelerating organic growth through selective acquisitions. “Over the last five years, we have invested ca. £1 billion to acquire 37 businesses collectively delivering ROATCE of 16% and growing, whilst maintaining balance sheet discipline,” news release added.
The acquisition of Peerless Aerospace will continue this track record of strong capital returns as well as being immediately accretive to Diploma’s organic growth and margins. Peerless has delivered long term organic revenue CAGR of ca. 9% and has EBIT margins of ca. 30%. In the first 12 months of ownership, Peerless is expected to be accretive to Group EPS by 8% and achieve a ROATCE of 15%, more than covering the Group’s cost of capital.
For the acquisition of Peerless, an initial payment of ca. £228m will be made in cash to Polar Holdings Inc. on closing, with the remaining 3.5% to be paid to management based on Peerless’s FY27 performance.
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.”