Kapco Global’s acquisition of Avio-Diepen in the Netherlands has positioned the Brea-based company to better compete against the distribution units of aerospace giants Boeing Co. and Airbus Group SE.
The transaction, which closed late last month, creates the largest independent distributor of aircraft parts in the world, with operations in eight countries and hubs in key markets in the Americas, Europe and Asia.
The combined company has about 600 employees and annual revenue of $575 million, putting it at No. 33 on the Business Journal’s annual list of largest private companies in Orange County (see coverage starting on this page; list starts on page 14).
Financial terms of the deal were undisclosed.
“The market wanted an independent player outside of Boeing and Airbus,” said Avio-Diepen Chief Executive Vincent von Campen, who takes a nonexecutive board seat as the integration gets under way. “The portfolio was a perfect match.”
The companies had nearly no conflicting business lines, despite decades in the industry.
Kapco, which was established in 1972 in La Habra by Kirkhill Rubber Co. to handle distribution of its sealing products, specializes in distributing electrical connections, sensors, switches and heating devices, sealants, and precision mechanical components.
It has served many of its customers, including Boeing, Delta Airlines and American Airlines, since it began. About 55% of its $400 million in annual sales is generated in the U.S.
Global Profile
The deal for Avio-Diepen gives it gains a strong international presence in the fast-growing Dubai market, plus warehouses and customer service centers in Amsterdam, Atlanta, Beijing, Hong Kong, London, Sao Paulo, Singapore and Sydney.
Avio-Diepen, which has delivered aircraft parts since 1946, has Air France, British Airways, Southwest Airlines and United Parcel Service among its thousands of customers in 100 countries. The company focuses solely on the aftermarket and claims it’s the largest distributor of interior products, including the premium Recaro seating brand, as well as lamps, seat tracks, window shades, carpeting, baggage dampers and hinges, and galley reclining mechanisms.
Kapco and Avio-Diepen both had long competed against similarly sized independents, including the likes of Seal Dynamics, Wencor and AAR, but the marriage better positions Kapco to take on Boeing’s Aviall unit, which was acquired in 2012 for about $1.7 billion, and Airbus’ Satair outfit, bought in 2011 for $504 million.
It’s common in the aerospace sector for companies to compete against some of their customers in certain segments. An aircraft typically is comprised of more than 1,000 parts, and despite the industry’s global nature, bigger players typically compete in several different business lines.
The acquisition brings several advantages to Kapco beyond new customers and an expanded presence in key markets—including greater scale, added financial and human resources, strengthened supply chain, the ability to create cost savings for customers, and expansion of services, such as inventory management and transaction processes automation.
“You can be more efficient,” said Kapco Chief Executive Andrew Todhunter. “Customers are looking for more value-added services.”
Todhunter credits the company’s unique ownership structure for helping boost sales from $50 million 15 years ago to $400 million today.
Kapco is one of about 11,000 U.S. companies with an employment stock ownership plan. The distributor established it in late 1988 and became entirely employee owned in 2002. Share distribution under the plan is calculated based on income. Employees are enrolled after six months of service, and vesting begins after three years. Workers are fully vested at seven years, and those who retire or leave Kapco are obligated to sell their shares back to the company.
“It’s had a profound impact on our growth and our performance,” Todhunter said. “We’re far more likely to take into account in a fairly profound way the impact on employees, more so than probably most companies.”
Move to Brea
Kapco moved its headquarters in 1981 to Enterprise Street in Brea, where several other aerospace companies have operations. The company built its current headquarters building in 2001, finishing amid the global turmoil that followed the Sept. 11 terrorist attacks, which severely affected the airline industry, suppliers and distributors. It now occupies three buildings totaling about 170,000 square feet, where it houses executives, sales teams and other corporate personnel, as well as some manufacturing operations and a distribution center.
“We’re shipping on average 1,000 to 1,100 orders a day,” said Todhunter, who enjoys the benefits of running a private, employee-owned company. “It’s a strategic advantage to be private in this day and age, because it allows you to take a more long-term view that public companies and private equity companies have trouble doing.”
