By Abhijith Ganapavaram and Allison Lampert
(Reuters) -Aerospace supplier HEICO (NYSE:HEI) Corp said on Monday it will buy Wencor Group in a deal valued at $2.05 billion to boost its portfolio of generic parts.
The deal comes at a time when airlines and aircraft repair shops in North America are increasingly relying on used and generic parts to keep jets flying, as supply-chain disruptions hinder supply of name-brand parts from companies such as General Electric (NYSE:GE) Co.
The purchase of Wencor, from its management and Warburg Pincus, will complement HEICO's current product line, HEICO Co-President Eric Mendelson told Reuters.
For example, HEICO doesn't make bearings, whereas Wencor is "very strong in bearings," Mendelson said, adding that he expects further consolidation within the general aerospace supply chain.
HEICO shares surged 8.2% in afternoon trade, hitting a record high.
Future targets for HEICO, which has acquired about 100 companies over the last 25 years, would include areas like parts, repair, distribution and specialty manufacturing, Mendelson added.
Mendelson said he was seeing interest from airlines to have new HEICO parts gain quicker regulatory approval, adding that turnaround time from the Federal Aviation Administration was reasonable.
When asked about the timing of approvals, the FAA said on Monday that "safety drives all of its timelines".
HEICO is looking at making parts for a new generation of narrowbody engines, such as Pratt & Whitney's GTF, Mendelson said, adding that he expects it will take two to seven years.
"Normally we want to wait until something is a mature system ... they (GTF) are going to be very reliable engines once they work out these teething issues."
HEICO will pay $1.9 billion in cash and $150 million in HEICO Class A common stock for Wencor.
Morgan Stanley & Co (NYSE:MS) acted as lead financial adviser to HEICO, with RBC Capital Markets LLC and Truist Securities also advising HEICO.
Citi was Wencor's lead adviser, while Jefferies its co-adviser.