AAR buys 65% of MRO Holdings at a $4 billion value: 14 times EBITDA before synergies, with shares issued at $135

AAR Corp, the aviation parts and repair company, agreed on Monday to buy a 65% controlling stake in aircraft maintenance provider MRO Holdings at an implied enterprise value of $4.0 billion, the company said. The equity for the stake costs about $1.8 billion, as the Wall Street Journal reported, and AAR will also repay about $1.3 billion of MRO Holdings' existing borrowings. AAR shares rose 6.1% to $121.92 in after-hours trading after closing at $114.92, according to Nasdaq data.

The number behind the 10.7x

AAR's headline says the price is 10.7 times MRO Holdings' forecast 2026 adjusted EBITDA. Read the footnote in the release: that multiple includes $75 million of run-rate cost synergies that AAR expects to reach over three to four years, and it subtracts transaction-related tax benefits with an estimated present value of about $150 million.

Strip both out and the arithmetic is simpler. MRO Holdings is expected to generate about $1.0 billion of sales and $285 million of adjusted EBITDA this year. A $4.0 billion enterprise value divided by $285 million is about 14.0 times. With the synergies and tax benefit included, $3.85 billion divided by $360 million gets you back to AAR's 10.7. The gap between those two figures is the part of the price that depends on AAR executing the integration.

What AAR is buying is margin. MRO Holdings runs at an adjusted EBITDA margin of about 27%. AAR itself reported 12.7% for the quarter ended August 31. The company says the deal lifts its consolidated margin from about 12% to 16% before synergies, and it raised its target to 19% to 20% within three to four years.

How it is paid for, and what that does to the balance sheet

• About $2.1 billion of new debt, backed by a committed bridge loan that AAR plans to refinance before closing.
• About $780 million of AAR stock issued to MRO Holdings' owners at $135 a share.
• About $230 million from a private placement led by The Pritzker Organization.

The $135 issue price is about 17% above Monday's $114.92 close and still about 11% above the after-hours price. At $135, $780 million works out to roughly 5.8 million new shares; AAR's diluted share count averaged 39.9 million last quarter, so the sellers' stock alone adds about 14%, before the private placement. The sellers are subject to lockups.

AAR ended August with net debt of $780.5 million and net leverage of 1.81 times, according to its first-quarter results filing. It expects about 3.6 times at closing, including synergies, falling to about 3.0 times within two years. It says it expects to keep a BB-category credit rating. AAR also gets 100% of MRO Holdings' excess cash flow for its first two years of ownership, which is how it plans to pay the debt down while holding options on the other 35%: 5% at any time within six years, and 10% on each of the second, third and fourth anniversaries.

The quarter underneath

AAR reported first-quarter sales of $918 million, up 24%, and adjusted earnings of $1.49 a share, up 38%. GAAP earnings were $1.00 a share. It nudged its full-year sales growth outlook, excluding legacy programs, to "low teens" from "low double-digits to low teens." That guidance excludes the deal.

Who it touches

MRO Holdings does heavy airframe checks with about 10,000 workers and 115 maintenance lines at facilities in El Salvador, Mexico, Colombia and the United States, and about 90% of its revenue comes from U.S. customers. For U.S. airlines, the deal puts one of their main outsourced heavy-check shops under the same roof as a parts distributor, which AAR says will pull more parts and repair revenue through the combined company. Closing is expected in AAR's fiscal third quarter, which ends in February 2027, subject to regulatory approvals. AAR holds a call on the deal and the quarter at 7:00 a.m. Central on Tuesday.

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Sources: AAR deal release, AAR Q1 fiscal 2027 results (SEC filing), Nasdaq market data. Share counts and multiples without synergies are Chronicle calculations from those figures. This is market information, not investment advice.