AirBoss purchase strengthens defense unit

NEWMARKET, Ontario—AirBoss of America Corp. plans to expand its operations and branch out with the purchase of a leading producer of personal protection and safety products.

Its acquisition of Immediate Response Technologies L.L.C., based in Landover, Md., is expected to significantly diversify the offerings of AirBoss Defense, a business unit of AirBoss of America, and generate sales of about $30 million and earnings before interest, taxes, depreciation and amortization of between $8 million and $9 million in 2015.

It will boost the firm's defense business in North America and set the stage for it to become a major player globally with a new line of products. It is the second time in the last 20 months AirBoss has purchased a company to expand and diversify its operation significantly.

According to one analyst, the deal more than doubles AirBoss Defense's revenues.

AirBoss initially will pay about $37 million in the all-cash transaction to buy all of the interests of IRT, a producer of personal protection and safety products, according to AirBoss President Lisa Swartzman.

That figure is subject to working capital adjustments.

Additional payments in a combination of cash and equity of up to approximately $25 million over a five-year period also could be paid, she said, subject to achievement of performance objectives over the 60-month period following the close of the transaction.

The acquisition is expected to close in the third quarter and is subject to normal regulatory approval along with approval from the Committee on Foreign Investment in the U.S.

IRT designs and manufactures respiratory protection systems and canisters; rapidly deployable chemical, biological, radiological and nuclear protection goods; medical isolation systems; rapidly deployable and expeditionary shelters; along with numerous other products for individuals, first responders, medical, military, law enforcement, and fire and industrial personnel.

All tie in nicely with AirBoss Defense's CBRN rubber gas masks, boots, gloves and a variety of other safety gear for the same markets.

While not a major part of IRT's product line, rubber and urethane components are used in some of the firm's products, including rubber gaskets, polyurethane hoses and polyurethane tubing.

IRT's filters also are used in AirBoss' gas masks.

The acquisition will provide an expanded defense product line and diversification of revenue and cash flow for Newmarket-based AirBoss, Swartzman said.

“We believe IRT's product mix is uniquely positioned to respond to the increasing production needs of the first responder, law enforcement, medical and military communities to chemical and biological threats,” she said.

She noted the addition of IRT gives AirBoss “an exceptional team of military and defense executives who will further enhance our existing defense operations, which will be fully integrated with the IRT business.”

IRT serves every U.S. military branch, the U.S. National Guard, FBI, Department of Homeland Security, Department of Health and Human Services, State Department, FEMA and many other similar units.

Once the deal closes, IRT's senior managers—including Tom Ripley and Coleman Ruiz—and the broader IRT management team will continue to run the day-to-day operations of the business.

IRT's work force also is being retained as is the company's 78,000-sq.-ft. production plant in Landover.

In addition, Ripley will become president of AirBoss Engineered Products. He cited the significant growth and development of IRT and “the strong future pipeline of products and programs that we are integrated into.”

He said the dedication of the firm's employees has enabled the company to become a leader in its field, “and we see the combination with AirBoss as an opportunity to further enhance our growth and that of the combined AirBoss Defense business.”

P. Gren Schoch, chairman and CEO of AirBoss, said he has gotten to know Ripley and Ruiz well through a commercial relationship on product development over the years, “and their knowledge and relationships in the defense sector will be an important addition to our AirBoss defense team.”

He said the company will market IRTs products to its international customers while “IRT is expected to greatly improve our penetration in the first responder, medical, military, law enforcement, fire and industrial markets.”

Analysts viewed the acquisition favorably.

Cormark Securities Inc.'s Hilda Maraachlian said: “We believe this is a strategic acquisition for AirBoss ... We like the acquisition as it strengthens AirBoss Defense's product portfolio, provides an opportunity to leverage IRT's expertise and cross-sell products, is immediately accretive to earnings, and diversifies AirBoss' products, revenue and cash flow.”

In the National Bank Financial daily bulletin, analyst Chris Bowes wrote that there are further growth opportunities with the addition of IRT, and sales force collaboration between the companies will bring more top-line growth.

“We expect this will allow management to deepen its product distribution and leverage their rubber compounding expertise from their other business segments,” the analyst said.

Shawn Levine of TD Securities Inc. said his firm views the transaction positively because it is “an attractive, relatively low-risk use of capital that provides diversification benefits within AirBoss Defense and for the consolidated company.

“In our view, management's patience in finding the right acquisitions and demonstrated success in integrating the Flexible Products acquisition reflect positively on the potential for further value creation going forward.”

AirBoss purchased automotive products maker Flexible Products Co. in October 2013. Both operations benefited and grew quickly.