VSE, a maintenance, repair and overhaul (MRO) provider and aftermarket distributor, is continuing its market rollup with the announced acquisition of Kellstrom Aerospace from private equity owners AE Industrial Partners.
Terms of the deal, announced Oct. 15, peg the price around $200 million, including $185 million or so in cash and the rest in stock, subject to adjustments made to account for working capital. Executives expect the deal to close this quarter after surpassing customary conditions.
Kellstrom provides distribution and technical services for the commercial aerospace engine aftermarket, which managers said was the “largest and fastest-growing sector” of the aviation aftermarket. The company supports more than 30 OEMs and around 800 airlines, air cargo operators, lessors, OEMs and MROs across 75 countries, with more than around half of its revenue generated outside North America.
“Kellstrom’s portfolio of engine-focused products and MRO services, coupled with its technical advisory capabilities and OEM-centric approach, makes this acquisition highly complementary to VSE Aviation’s business,” VSE Aviation President Ben Thomas said in the announcement. The acquisition is expected to yield “significant” sales benefits and around $4 million worth of operating efficiencies when merged into VSE.
Kellstrom generated roughly $175 million in revenue during the 12 months through August 2024. AEI bought Kellstrom—then Kellstrom Materials—in April 2015 from Inverness Management, another private investor. Terms of that deal were not disclosed.
For VSE, Kellstrom is the latest addition. In July 2023, VSE completed a $124 million acquisition of Desser Aerospace. Desser operated a variety of aftermarket distribution, MRO and parts manufacturer approval businesses throughout the U.S., UK and Australia.
Managers said Kellstrom is strongly aligned with VSE Aviation’s technical OEM-focused distribution business and also provides complementary product and repair capabilities to the recently acquired Turbine Controls business, whose $120 million acquisition closed in April 2024.
Interestingly, VSE CEO and President John Cuomo said in September that his company did not necessarily need mergers and acquisitions (M&A) for growth. Cuomo spent almost two decades with the former KLX distribution business as it cycled through owners including B/E Aerospace, Rockwell Collins and Boeing, and at the Gabelli investor conference he noted how that business depended on bolt-ons while VSE is different. “This business, we will outgrow the market organically whether we have M&A or not,” he said.
As part of the Kellstrom announcement, VSE also provided preliminary third-quarter results. Revenue well within $268-275 million, up from $231.4 million in the third quarter of 2023. Adjusted pretax earnings will fall within $31-34 million, in line with $32.3 million a year before.
