AAR shares rise on Aviation Worldwide deal

AAR shares rise on Aviation Worldwide deal

By Bijoy Anandoth Koyitty

Stocks | Mergers & Acquisitions | Industrials

BANGALORE, March 26 (Reuters) - Shares of AAR Corp (AIR.N) rose as much as 6 percent on Friday, a day after it agreed to acquire Aviation Worldwide Services for $200 million to expand its services to government customers in the United States and abroad.

The acquisition of Aviation Worldwide Services, which provides airlift services and aircraft modifications to the United States and other government customers, indicates AAR's increased focus on the government business.

"The market for government aviation services represents a tremendous growth opportunity as our country provides resources and support for developing nations and other national interests," Chief Executive David Storch said in a release. [ID:nSGE62O0JQ]

CJS Securities analyst Lawrence Solow said the deal would help AAR's efforts to evolve as a prime contractor in the area of airlift services and aircraft modification for military.

"So the growth opportunity is that - the market is tremendous, it is growing as the defense budget is growing globally. So this deal will help AAR to penetrate into new opportunities," Solow said.

U.S. President Barack Obama in February had asked Congress to approve a record $708 billion in defense spending for fiscal 2011. [ID:nN01203835]

Government and defense customers accounted for nearly half of AAR's third-quarter sales. Solow said the deal would see AAR increasing its revenue share in the government sector to about 55 percent.

"It is been their strategy to try and get more and more into business with governments. Some of the synergies are, AAR is big on system support, part support, maintenance and repair," Solow said.

AAR shares were trading up 5 percent at $25.11 in afternoon trade on the New York Stock Exchange. They touched a high of $25.23 in morning trade. (Reporting by Bijoy Koyitty in Bangalore; Editing by Maju Samuel)