Hanwha Group will acquire a U.S. aircraft engine parts maker for about US$300 million.
Hanwha Aerospace announced on June 10 that it would acquire a 100 percent stake in EDAC, a U.S. aircraft engine parts manufacturer. Hanwha Aerospace is Korea's only aviation engine parts maker.
EDAC supplies major aircraft components to GE and Pratt & Whitney (P&W), global airline engine producers. The company posted about US$150 million in sales last year and has about 590 employees.
Hanwha Aerospace plans to acquire EDAC through Accelerate Merger Corp. (AMC), a subsidiary in the United States. To this end, it plans to increase the capital of AMC by 350 billion won by the end of the year. After that, EDAC will absorb AMC to convert all AMC shares into EDAC shares and Hanwha Aerospace will acquire 100 percent of the EDAC shares.
The company's main products are integrated rotor blades (IBRs) and cases for advanced aircraft engines. The IBR is a key component of an aviation engine that is made up of blades attached to a rotor, which is a long axis at the center of the engine. Hanwha Aerospace is also supplying parts to the world's three major aviation engine manufacturers -- GE, P&W and Rolls-Royce. But Hanwha Aerospace focuses on fixed parts rather than high value-added rotors. By acquiring EDAC, Hanwha Aerospace will expand its product portfolio.
Hanhwa Aerospace will enter the mainstream of the global aviation engine industry by taking over EDAC. The U.S. state of Connecticut, where the EDAC main office is located, is the center of the U.S. aircraft engine industry. The state is also adjacent to the State of Massachusetts which is home to GE’s main office. Hanwha Aerospace will be able to secure a platform in the center of the global aviation industry and expand its sales power, order receipt and product portfolio through EDAC.
Hanwha Aerospace is having its presence felt in the aircraft engine manufacturing market. P&W selected Hanwha Aerospace as a partner of the risk and revenue program (RSP). RSP partners take part in P&W projects from the product development stage. The development of aircraft engines requires an astronomical 5 to 10 trillion won in investment. Since global engine manufacturers are not able to complete such projects on their own, they receive investment from companies with proven technology and competitiveness by letting them participate from the development stages. P&W's RSP partners are only eight in the world. The acquisition of EDAC is expected to speed up the development of Hanwha Aerospace’s airline business.
The aviation engine parts business is a field Hanwha Group is strategically fostering after it acquired the company from Samsung Group in 2015. The group will invest 4 trillion won in strengthening global competitiveness of its aerospace business by 2022. The global aircraft engine parts market is expected to grow at an annual average of 6 percent, reaching $54.2 billion by 2025.