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Esterline Acquisition of Barco’s Defense, Aerospace & Training Business February 2015
Acquisition Timeline Overview • In Sept. 2014, Esterline announced that the
company would acquire strategic portions of Belgium-based Barco NV, a leading worldwide visual display provider
• Acquisition includes Barco’s defense, aerospace and training visualization capabilities
• The transaction closed Jan. 31, 2015
Acquisition of Barco’s Defense, Aerospace & Training Business 1
Key Investment Highlights • Strategic bolt-on acquisition with complementary
technology to several Esterline businesses • Similar market balance and key capabilities
including human-machine interface and harsh-environment standards
• Strong integration opportunity – many synergies • Effective use of cash – transaction fits well with
our capital allocation strategy
Acquisition of Barco’s Defense, Aerospace & Training Business
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Acquisition Rationale • Esterline & Barco have a long-standing relationship as
both partners and competitors and hold a strong mutual respect for each other
• Adding Barco’s Defense, Aerospace & Training capabilities to Esterline offers customers a greater range of solutions and offers the combined business a wider global customer reach and new program opportunities
Acquisition of Barco’s Defense, Aerospace & Training Business
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Combined business strength creates a strong, world-leading displays company.
Control rooms
•Broadcast •Emergency operations centers
•Oil & gas •Security/CCTV •Telecom •Traffic management
•Utilities & process control
Defense & Aerospace
•Air traffic control (ATC) & management
•Avionics •C4ISR •Command centers
Corporate AV Digital cinema
•Movie theater •Theater lobby •Postproduction
Healthcare
•Dentistry •Mammography •Pathology •Radiology •Surgery •Point of care •Clinical specialties
Media & entertainment
•DOOH (advertising)
•Branding & retail
•Rental & staging
•Sports & venues
•Visitor attractions
Simulation & virtual reality
•Automotive •Oil & gas •Science •Training & simulation
Acquired Pieces of Barco NV • Defense and Aerospace Division • Training & Simulation portion of Simulation Division
4
* Equity Market Capitalization plus Long-Term Debt less Cash
•Training & simulation
Acquisition of Barco’s Defense, Aerospace & Training Business
Products and Technologies
5
Avio
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Rug
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Dis
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ATC
Dis
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Defense, Aerospace & Training Key Stats. Founded in the 1980s, the Defense, Aerospace & Training business is now the largest independent Tier 3 display provider with ‘best in class’ positions within its core markets
Acquisition of Barco’s Defense, Aerospace & Training Business
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By Geography
N. America W. Europe APAC Emerging
Global provider of rugged displays, computers and consoles for the naval, shelter, UAV and ground army segments
Global, independent leader in cockpit displays, middleware and computers for the Civil and Military aircraft
Leader in main radar, auxiliary and tower displays for the Air Traffic Control segment
Global, independent leader in Training and Simulation systems providing to Tier 1 simulator integrators
Defense
Avionics
Air Traffic Control
Training & Simulation
DEFENSE, AEROSPACE & TRAINING FY’13 Revenue - €149.7M
No.1 in market No.3 in market No.1 in market No.2 in market
Defense, Aerospace & Training Key Stats. • Approx. 600 employees at production facilities in
Belgium, Israel, France, Singapore and U.S. • Worldwide sales presence in strategic hubs • Senior management with an average of
20 years of experience • Access to senior management at key system
integrators through global network
Acquisition of Barco’s Defense, Aerospace & Training Business
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Strategic Fit
SKILLS - Experienced management team and strong display technology talent to fill resource gaps SCALE - Excellent fit with complementary products SCOPE - Helps grow strategic displays business SPEED - Accelerates technology roadmap progress
Acquisition of Barco’s Defense, Aerospace & Training Business
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SKILLS SPEED
SCOPE SCALE
Strong Portfolio of Complementary Products
Acquisition of Barco’s Defense, Aerospace & Training Business
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Avi
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Dis
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ATC
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CMA-9000 FMS CMA-5025
CMA-2082F Electronic Warfare 4x5, 5x7, 6x8 Multifunction Displays
TacView® Portable Mission Display
KDM1040S, KDM640S, & KDM340S (3ATI)
ES
L Synergistic P
roducts E
SL C
omplem
entary C
ockpit Solutions
Combined Markets, Global Customer Reach
Acquisition of Barco’s Defense, Aerospace & Training Business
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Civil Fixed Wing
Business & Regional
Military Fixed Wing
Military Ground
Helicopters Unmanned Systems
Air Traffic Control
Training & Simulation
Highly complementary markets served by the combined product families of Esterline and the new Defense, Aerospace & Training products.
Provides new opportunities to reach existing customers and generate additional business growth.
Esterline A&C Segment
Newly Acquired Products
ESTERLINE TECHNOLOGIES
Avionics & Controls Segment
Avionics Systems Control &
Communication Systems
Interface Technologies
Sensors & Systems Segment
Advanced Sensors
Connection Technologies Power Systems
Advanced Materials Segment
Defense Technologies
Engineered Materials
Business Integration
Acquisition of Barco’s Defense, Aerospace & Training Business
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The Barco businesses will join and report through two
Esterline business platforms.
Avionics and Training & Simulation businesses will integrate into the Avionics Systems platform which is headquartered in Montreal, Canada. Defense and ATC business will integrate into the Control & Communication Systems platform which is headquartered in Everett, Washington.
Headquarters: Bellevue, Washington Public company (NYSE: ESL) founded in 1967 Employees: >12,000 Revenue: $2B
Business Integration
Acquisition of Barco’s Defense, Aerospace & Training Business
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Avionics & Controls Segment
Avionics Systems Control &
Communication Systems
Esterline Avionics Systems Platform Specializes in avionics displays and cockpit systems integration Highly complementary product and customer portfolio with the Avionics group Training & Simulation provides some read across to cockpit systems
integration work Esterline Control & Communication Systems Platform Specializes in ruggedized displays and human-machine interface
control systems Well suited for the defense and air traffic control product applications Wider military presence with key U.S. defense contractors Continued integration of the newly acquired products and the two Esterline platforms will continue once the acquisition has been fully absorbed with cross-segment interaction ongoing for key activities such as R&D, Sales & Marketing, and Procurement.
Business Potential Stable “base” revenue supported by attractive foundational market presence - Defense: Displays for naval C4ISR / combat systems, Unmanned Aircraft Systems ground control - Avionics: Displays for popular business jets and military aircraft in full rate production - ATC: High market share grounded in major US FAA display modernization program - Training & Simulation: Long-term relationships with leading simulator OEMs (e.g., CAE, L-3, etc.)
Growth driven by both specific programmatic positions and overall market uplift – Defense: Annual armored vehicle sales growth due to six well-supported programs (Saudi Royal Guard, UK Scout,
German PUMA and Boxer, Singaporean Terrex / Bionix and U.S. JLTV) – Avionics: High-end business jets and new model introductions (e.g., PC-24, C919) drive growth in out years – ATC: ISIS-4 with new screen creates differentiation during period of sustained ~6% CAGR global ATM growth – Training & Simulation: Growth stems from non-US growth in tactical military aircraft sales
Portfolio and product positions include potentially significant upside – Training & Simulation: US T-X trainer program beginning to ramp in 2019+
Opportunity where company has strong relationships with simulator providers (i.e., CAE, L-3, Saab/Boeing, LMT) – Defense: U.S. JLTV program; U.S. GCV program (or alternative); General Atomics UAS GCS networking upgrade
Acquisition of Barco’s Defense, Aerospace & Training Business
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Business Potential
Acquisition of Barco’s Defense, Aerospace & Training Business
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Strengths Superior brand recognition – considered the highest standard of display & projector solutions High barrier to entry with relatively low competitive base Solid relationships with key Avionics Integrators (i.e. Honeywell) Extensive presence in Europe and Asia
Integration into Esterline’s Avionics & Controls
Segment will sharpen the focus on this business,
allowing stronger performance and greater returns
$50M+ Displays Business
4,000+ Displays Annually
Top Tier OEMs & System
Integrators
Regional Customer
Base
Creating a Better Combined Business
Acquisition of Barco’s Defense, Aerospace & Training Business
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$250M+ Displays Business
8,000+ Displays Annually
Top Tier OEMs & System
Integrators
Worldwide Customer
Base
After
Before