Eaton to acquire AT’s aerospace business

Eaton Corp. said Thursday that it would buy AT Holdings Corp., parent of Argo-Tech Corp., from two private equity firms for $695 million to expand its aerospace business.

The deal, a combination of cash and debt, with private equity firms Greenbriar Equity Group and Vestar Capital Partners is expected to close in the first quarter of 2007. Eaton declined to provide details.

Eaton’s products include electrical power distribution and control equipment as well as engine parts and hydraulic and fluid power systems, many of which are used in the aerospace sector.

Argo-Tech makes aerospace engine fuel pumps and systems, airframe fuel pumps and systems, and ground fueling systems for commercial and military aerospace markets.

Eaton said adding Argo-Tech would allow it to offer customers a total fuel system.

Greenbriar and Vestar acquired Cleveland-based AT Holdings in October 2005 for $120 million in equity and notes for a total deal value of $450 million, according to an October report from Standard & Poor’s Ratings Services.

Prudential Equity Group analyst Igor Maryasis praised the deal, saying Eaton was trying to offset its exposure to the declining North American heavy-duty truck and automotive markets, but expressed some concern.

Before closing the deal, AT Holdings would be reorganized to exclude its cryogenics and other nonaerospace businesses, which had sales of $22 million in 2006, and certain other assets, Cleveland-based Eaton said.

Argo-Tech’s aerospace business had sales of $206 million for the fiscal year ended Oct. 28. It is the world’s largest supplier of main engine fuel pumps, used in more than 60% of large commercial aircraft, according to Eaton, and derives about half of its sales from the replacement parts market, according to S&P.;

Argo-Tech employs 640 people in Cleveland, Costa Mesa, Inglewood and Tucson.

It is the sole source supplier of the main engine fuel pump for the General Electric GEnx engines to be used on the Boeing 787, Airbus A350 and the Boeing 747-8, and is the fuel system supplier for the Eclipse 500 and Adams 700.

Eaton shares closed up 37 cents at $75.80.