Rohr in Billion-Dollar Merger Talks With Unnamed Firm

Rohr Inc., a maker of aircraft engine parts, said Thursday that it was in talks to be acquired by an unidentified company in a deal that could be worth more than $1 billion.

The Chula Vista-based company said the talks involve a price of $30.25 a share. Based on the 26.2 million shares outstanding, the deal would be worth about $793 million, but analysts said a buyer could pay more. In addition, Rohr has about $450 million of debt.

Rohr would disclose neither the name of the company with which it is negotiating nor when the talks are likely to conclude, said Laurence Chapman, Rohr spokesman.

Earlier Thursday, Rohr stock surged to a 52-week high of $33.38 on talk it would be acquired by Boeing Co. or Lockheed Martin Corp. Rohr stock closed up 69 cents at $28.50 on the New York Stock Exchange.

Rohr’s biggest customer is Boeing’s McDonnell Douglas, followed by European aircraft maker Airbus Industrie. Rohr is the largest supplier of nacelles to both companies. Nacelles are engine coverings that include thrust reversers, which help the aircraft brake. The company also makes pylons that hold the engines onto the wings.

Though Boeing makes most of its own nacelles, Rohr also supplies Boeing’s 747 and 767 aircraft through agreements with engine manufacturers.

Paul Nisbet, an analyst at JSA Research, said Lockheed Martin was the most likely company to buy Rohr.

“Because of Lockheed’s planned merger with Northrop Grumman, this would fit very well,” he said. Lockheed agreed to acquire Northrop in July in a deal worth $11.6 billion.

Los Angeles-based Northrop Grumman is a leading producer of airplane parts of the kind Rohr makes. On July 3 it agreed to be acquired by Bethesda, Md.-based Lockheed Martin for $11.6 billion.

Tony Cantafio, Northrop Grumman spokesman, and Charles Manor, a Lockheed Martin spokesman, both declined to comment on whether they are interested in Rohr. Boeing officials also declined comment.

Rohr had sales of $771 million in fiscal 1996.

Northrop has commercial aerospace sales of more than $1 billion a year with about two-thirds of that coming from Boeing. It makes nacelles for the C-17 and Gulfstream IV, fuselage and tail parts for the Boeing 747 and 757, stabilizers and flaps for the 767 and 777 and doors for the 737.

Nisbet dismissed speculation that Boeing may wish to acquire Rohr given that it is a major supplier to Airbus.

“I can’t imagine Boeing would want to be in a business where they become a supplier to their major competitor,” he said. “I would assume Boeing would have no interest in that.”

Jon Kutler of Quarterdeck Investment Partners also sees Lockheed as a logical suitor. He said that since the deal would be for stock, that limits the number of possible buyers. He also dismissed Boeing as a potential buyer given its heavy backlog and work to be done integrating McDonnell Douglas.