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VSE Corporation and The Loar Group form alliance to takeover Desser Aerospace

VSE Corporation and The Loar Group form alliance to takeover Desser Aerospace.
This acquisition aligns with VSE’s recently announced strategic priorities and focus on higher-growth, higher-margin aftermarket services and solutions.

Under the terms of the agreement, VSE will acquire Desser Aerospace for a total cash consideration of approximately $124 million, subject to customary working capital adjustments.

VSE Corporation, a provider of aftermarket distribution and maintenance, repair and overhaul (MRO) services for air, land, and sea transportation assets for commercial and government markets, has entered into a definitive agreement to acquire Desser Holding Company LLC, a global aftermarket solutions provider of specialty distribution and MRO services. Under the terms of the agreement, VSE will acquire Desser Aerospace for a total cash consideration of approximately $124 million, subject to customary working capital adjustments. The acquisition is expected to close within 90 days, subject to regulatory approvals.

“I am proud to announce today’s transaction as another meaningful step in the execution of our multi-year business transformation plan centered on pursuing strategic organic and inorganic opportunities that allow us to expand our aerospace distribution and MRO service offerings,” said John Cuomo, President and CEO, VSE Corporation. “The acquisition supports our tip-to-tail aircraft distribution and MRO services strategy and provides VSE access to the highly fragmented commercial and B&GA aftermarkets. Desser, and their family of businesses, also provide a platform for geographic expansion in high-growth international markets. This value-enhancing acquisition is consistent with VSE’s capital-allocation priorities and positions our business for an incredibly bright future,” he further added.

Desser Aerospace, founded in 1920, is the world’s largest independent distributor of aircraft tires and tubes, a leading global distributor of brakes and batteries, and a component MRO services provider. Desser’s global distribution and MRO operation locations in California, Tennessee, the United Kingdom, and Australia, serve a diverse and attractive aftermarket customer base across all aviation industry segments, including commercial aviation, business and general aviation (B&GA), and military aftermarket customers.

“We are excited to welcome the Desser, Desser Australia, Watts Aviation, Aero Wheel and Brake, Cee Bailey’s, and Rotable Repairs team to the VSE Aviation family,” said Ben Thomas, President, VSE Aviation. “We look forward to building on Desser Aerospace’s track record of success as a specialized, highly technical supplier. Together we will offer our respective customers an expanded portfolio of products and services while accelerating the growth of the combined businesses,” he further added.

This acquisition aligns with VSE’s recently announced strategic priorities and focuses on higher-growth, higher-margin aftermarket services and solutions. As the company continues to build long-term, sustainable sources of profitable revenue, Aviation will be a key driver of growth for VSE. Desser Aerospace is expected to expand and diversify the existing operations of the Aviation segment, driving continued, above-market growth.

“We recognize the importance of maintaining a strong balance sheet and improving our cash position to drive long-term shareholder value,” said Steve Griffin, Chief Financial Officer, VSE Corporation. “Upon closing the Desser Aerospace acquisition, we expect net leverage ratio to increase to approximately 4.5x. We plan to reduce net leverage ratio with the proceeds from the sale of the Federal and Defense segment, second-half 2023 free cash flow, and growth in Adjusted EBITDA. We are targeting a net leverage ratio below 3.5x in 2024, assuming the full earn-out from the Federal and Defense business sale is achieved,” he further added.

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In addition to the acquisition of Desser Aerospace, VSE plans to immediately sell Desser Aerospace’s Proprietary Solutions businesses to The Loar Group Inc., a diversified manufacturer and supplier specializing in aerospace and defense components. This sale will facilitate present and future collaborative opportunities for VSE to both distribute Loar’s market-leading products to the global aftermarket and support Loar products through the Company’s MRO capabilities. Jones Day served as legal counsel to VSE Corporation, and Jefferies LLC served as financial advisor to Desser Holding Company LLC.