Cedar Rapids, Iowa-based Rockwell Collins (NYSE: COL ) is about to get a new subsidiary. On Sunday, Rockwell Collins announced it has agreed to buy aviation networks company ARINC Inc. from private equity owner The Carlyle Group (NASDAQ: CG ) .
The purchase, which Rockwell Collins says will cost it $1.39 billion, values ARINC at 2.3 times the company's $600 million in estimated 2013 sales. That's a slight premium to the 2.2-times-sales valuation of Rockwell Collins' own shares. On the other hand, in buying ARINC, Rockwell Collins basically guarantees that it will exceed analysts' expectations of 5% revenue growth this year, plus a further 6% next year.
Profits-wise, Rockwell Collins say it expects the acquisition to be accretive to earnings.
Rockwell Collins CEO Kelly Ortberg also described the acquisition as "a natural fit for Rockwell Collins" in that it "accelerates our strategy to develop comprehensive information management solutions by building on our existing information-enabled products and systems and ARINC's ground-based networks and services to further expand our opportunities beyond the aircraft."
Customary closing conditions must be met and regulatory approval granted.