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TransDigm weighs options for using cash stockpile

TransDigm Group has accumulated almost USD5 billion in cash and is considering potential ways to deploy part of its war chest, according to a top executive at the US aircraft parts maker.

The likely spending options are acquisitions, share buybacks, and dividends, TransDigm president and CEO Kevin Stein told analysts on 8 February.

“We are now at a decision point with regard to our sizable cash balance,” Stein said. “All three options are on the table, each individually, but then also potentially in some combination over the next 12 months.”

TransDigm has a “decent” acquisition pipeline that consists mostly of small and mid-sized companies, Stein added.

Acquisitions have been a key part of TransDigm's growth strategy. Recent purchases include UK-based Cobham Aerospace Connectivity (CAC) for USD965 million in 2021 and US-based Esterline Technologies for USD4 billion in 2019. TransDigm informally offered GBP7.03 billion (USD9.51 billion) for UK-based Meggitt in August 2021 but decided the following month against making a formal bid.

Stein made his comments while discussing TransDigm's latest financial results. In the first quarter of fiscal year 2022, net sales grew 8% to USD1.2 billion, and adjusted net income jumped 53.9% to USD177 million.

Stein said TransDigm has not decided whether it will repay some or all of the USD20.8 million in excess profit that it allegedly received under contracts it had with the US Department of Defense from 2017 to 2019. The company has questioned the accuracy of the recent audit report that made the overcharging accusations.

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