Kaman taken private in $1.8bn deal

April 2024 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

April 2024 Issue

Private equity firm Arcline Investment Management has agreed to acquire aviation technology company Kaman Corp. in an all-cash deal worth around $1.8bn.

Under the terms of the agreement, Kaman shareholders will receive $46 per share in cash, a premium of around 105 percent over Kaman’s closing share price on 18 January 2024, the last full trading day prior to the transaction announcement, and a premium of approximately 110 percent over the volume weighted average price of Kaman common stock for the 90 days ending 18 January 2024. Arcline intends to fund the transaction with a combination of committed debt and equity financing.

The deal has been unanimously approved by Kaman’s board of directors and is expected to close in the first half of 2024, subject to customary closing conditions, including approval by Kaman shareholders and receipt of required regulatory approvals. Upon completion of the transaction, Kaman will become a wholly owned subsidiary of investment funds managed by Arcline and Kaman’s common stock will no longer be listed on any public stock exchange.

Kaman was founded in 1945 by aviator Charles Kaman and is known for its heavy-lift K-MAX manned helicopter. The company also manufactures aircraft components and aerostructures for helicopters, fixed-wing and unmanned aircraft and has performed subcontract work to restore, modify and support the SH-2G Seasprite maritime helicopters. Kaman counts the US military, plane manufacturer Boeing and defence firms Lockheed Martin and RTX among its customers.

“Following robust engagement with Arcline and careful evaluation of other potential value creation opportunities, we are pleased to have reached this agreement,” said Ian K. Walsh, chairman, president and chief executive of Kaman. “Given the rigorous review of alternatives we recently completed, we are confident this transaction maximizes value for shareholders and is in the best interest of Kaman as well as our employees, customers and other stakeholders.

“Over the last several quarters, we have made significant progress executing our strategy by transforming our portfolio, through investing in innovation, pivoting to new growth technologies, and optimizing the Company’s cost structure. Arcline recognizes the strength of Kaman’s leadership and team, product portfolio and outstanding employees, and we look forward to benefitting from increased resources, expertise and flexibility as a private company post-closing. We thank Kaman’s many valued employees for helping us reach this important milestone in the Company’s history,” he added.

“We have tremendous respect and admiration for Kaman’s team, history, and its portfolio of brands,” said Arcline. “Kaman has long been a trusted solutions provider of engineered components and subsystems to mission-critical markets, and we believe the Company is in a strong position to grow and benefit from attractive tailwinds. We look forward to working closely with Ian and the rest of the talented Kaman team to drive further growth through accelerated investments in both new product development and strategic acquisitions.”

Arcline is a growth-oriented private equity firm with $8.9bn in cumulative capital commitments. The firm seeks to invest in technology driven, industrial businesses.

News of Kaman’s sale to Arcline comes following a period of strategic transformation for the company, which has been characterised by investments in cutting-edge technologies, expansion into new growth areas, and operational streamlining. The company recovered well from the coronavirus (COVID-19) pandemic, returning to profitability in 2021 before encountering a loss in 2022. This was driven in part by restructuring costs and the decision to shutter the K-MAX helicopter programme which had experienced low demand since returning from a hiatus. In light of this minimal demand and the variation in annual deliveries, combined with low profitability and large working capital inventory requirements, Kaman determined that the K-MAX did not deliver a particularly compelling growth opportunity going forward.

Kaman has also announced a reduction in its defence programme, noting that it would be moving away from its Joint Programmable Fuze (JPF) programme, closing one plant tied to its production. Previously, defence-related operations had accounted for about 50 percent of Kaman’s revenue; more recently that number was around 40 percent.

Richard Summerfield