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Battery suppliers leading a charge
By James. H. Smith
March 01, 2006
Investors seeking to tap the lucrative defense market should look further
afield from the traditional weapons and IT companies. The defense and
homeland security markets are not confined to weapons and IT companies.
As an example, Ohio-based TransDigm is expected to come to market with an
initial public offering (IPO) in late March to raise about US$230 million,
based on selling about 11 million shares at an estimated mid-point price
range of US$20 to US$22 per share.
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TransDigm is currently in the quiet period in which the US Securities and
Exchange Commission (SEC) bans promotional publicity on the company.
TransDigm supplies aircraft components, including ignition systems,
batteries and other apparatus for the commercial and military aircraft
market.
Estimates are that, generally, IPOs have risen 11 per cent this year on the
first trading day.
The company is currently owned by private equity firm Warburg Pincus.
Joint book runners on the deal are Credit Suisse and Lehman Brothers.
Co-managers are Goldman Sachs, UBS Investment Bank and Banc of America.
In another deal focused on the battery sector, New York Stock Exchange
listed EnerSys announced last week the purchase of Rhode Island-based
development stage company Modular Energy Devices Inc.
EnerSys is the world's largest manufacturer, marketer and distributor of
industrial batteries
The acquired company produces large format lithium-ion rechargeable
batteries utilized in aerospace and defense applications as well as
specialized standby power and commercial applications.
The investment is targeted toward the aerospace and defense sector and
complement’s EnerSys’ lead-acid and nickel based specialty product lines.
EnerSys first contracted ModEnergy to develop a specific product for a
military application.
Bankers appear to have a positive view of companies producing products in
the stored electrical energy sector.
Georgia-based Exide Technologies, which supplies batteries to a number of
industries, including the transportation and military/aerospace sectors,
recently was able to upsize its senior secured bank facility by
approximately US$46 million.
The new facility retains pricing of Libor plus 525bp and includes a number
of key components.
The deal removes most financial covenants with the exception of trailing
12-month consolidated EBITDA, maximum capital expenditures and a leverage
ratio test for permitted acquisitions, which were modified.
Components of the new deal include elimination of scheduled amortization;
ability of the company to retain all proceeds from the sale of certain
non-core assets, not to exceed US$30 million; and extended call protection
for lenders that now includes the revolving credit facility.
The battery business also stands to benefit from a call by the Bush
administration for the development of alternative energy sources although at
this point concrete incentives for companies in the stored electrical energy
sector, including tax incentives, have not been fully defined.
Disclaimer
James Smith is an independent columnist for this web site. James Smith may
hold long or short positions in any of the stocks mentioned in this article
and those positions can change at any moment.
InvestorIdeas.com Disclaimer:
www.InvestorIdeas.com/About/Disclaimer.asp, InvestorIdeas is not
affiliated or compensated by the companies mentioned in this article. James
Smith is a freelance writer. Nothing in the articles should be construed as
an offer or solicitation or recommendation to buy or sell any specific
products or securities. Past performance does not guarantee future results.
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