Héroux-Devtek secures key approvals for takeover by Platinum Equity! What’s next?

Héroux-Devtek Inc. (TSX: HRX), a Québec-based aerospace manufacturer and the world’s third-largest landing gear maker, has received a final order from the Superior Court of Québec approving its plan of arrangement involving an affiliate of Platinum Equity Advisors, LLC. The court’s approval under the Business Corporations Act (Québec) marks a crucial step toward completing the CAD 1.35 billion acquisition deal, which was first announced in July 2024.

Background and Strategic Rationale for the Deal

The acquisition is a result of a comprehensive strategic review conducted by Héroux-Devtek’s board of directors and a special committee of independent directors. The deal is valued at CAD 1.35 billion, with Platinum Equity set to acquire all issued and outstanding common shares of Héroux-Devtek for CAD 32.50 per share in cash. This price represents a significant premium over the company’s recent trading price of CAD 25.32 on the Toronto Stock Exchange.

Financial advisors National Bank Financial Inc., Scotiabank, and Desjardins Capital Markets provided fairness opinions and independent valuations to Héroux-Devtek’s board, stating that the terms of the acquisition were fair to shareholders from a financial standpoint. Héroux-Devtek’s board has unanimously recommended the deal, citing that it is in the best interests of the company and its stakeholders.

Commitment to Québec and Long-Term Vision

Platinum Equity, which has more than USD 48 billion in assets under management, has committed to maintaining Héroux-Devtek’s headquarters in Longueuil, Québec, and investing in its R&D centre in Saint-Hubert. This commitment is crucial for Québec’s aerospace sector, which has a long history of engineering and manufacturing excellence. Louis Samson, Co-President of Platinum Equity, has emphasized the firm’s dedication to supporting Héroux-Devtek’s growth as a global aerospace leader while keeping its strong ties to its Québec roots.

The Caisse de dépôt et placement du Québec (CDPQ), a long-time investor in Héroux-Devtek, has expressed strong support for the transaction. CDPQ’s Executive Vice-President, Kim Thomassin, highlighted that Platinum Equity’s commitment to Québec is aligned with the interests of all stakeholders, ensuring that the company continues to grow while remaining anchored in the province.

Regulatory Approvals and Shareholder Requirements

The transaction remains subject to several closing conditions, including regulatory approvals in Canada, the United States, the United Kingdom, and Spain, as well as shareholder approval. Shareholder approval requires at least 66⅔% of the votes cast at a special meeting and a majority of the votes excluding shares held by certain insiders. A recent decision by the U.K. Government not to take further action under the National Security and Investment Act 2021 has removed a key hurdle for the deal.

The deal also includes specific conditions such as non-solicitation covenants and termination fees. A termination fee of CAD 40 million would be payable by Héroux-Devtek to Platinum Equity under certain circumstances, such as the acceptance of a superior proposal, while a reverse termination fee of CAD 63 million would apply if the deal fails to close due to unmet conditions.

Future Prospects Under Platinum Equity

With the acquisition, Héroux-Devtek will transition to a privately held company and will be delisted from the Toronto Stock Exchange. This move is expected to provide the company with greater strategic flexibility, enabling it to focus on long-term growth without the pressures of quarterly financial reporting. Platinum Equity plans to support Héroux-Devtek’s expansion through both organic growth and strategic acquisitions, leveraging its expertise in mergers, acquisitions, and operations (M&A&O®).

The final court approval in Québec, combined with the regulatory clearance from the U.K. Government, brings Héroux-Devtek closer to finalizing its acquisition by Platinum Equity. The transaction is anticipated to close by March 31, 2025, subject to the remaining regulatory and shareholder approvals. This acquisition represents a significant development for Héroux-Devtek, ensuring its continued growth and leadership in the global aerospace market while remaining firmly rooted in Québec.