TAT Technologies soars on MRO contract with Honeywell

Ishay Davidi

Honeywell is a veteran customer of TAT Technologies, controlled by Ishay Davidi's FIMI, accounting for over 10% of its sales.

The share price of TAT Technologies Ltd. (Nasdaq:TATT; TASE:TATTF) has shot up by 30% on the Tel Aviv Stock Exchange, following a rise of 40% in New York, after the announcement of a new contract with an important veteran customer. TAT Technologies, which is controlled by private equity firm FIMI Opportunity Funds, headed by Ishay Davidi, provides products and services to the aviation industry. At the end of last week, the company announced the signing of a maintenance, repair and overhaul agreement (MRO) with US industrial giant Honeywell, which supplies various aviation systems.

Through TAT Technologies' US unit Piedmont, Honeywell is a veteran customer of the company, and in 2019 TAT Technologies' revenue from it amounted to $12 million, 11.7% of its total revenue that year. The new contract relates to maintenance and repair of Honeywell's 331 APU (auxiliary power unit), for which TAT will provide services to Honeywell's customers. According to Honeywell's website, both Airbus and Boeing use this component.

"We are proud to be selected by Honeywell as the preferred long-term partner to provide global MRO services to Honeywell’s 331 APU," said TAT Technologies CEO Igal Zamir. "TAT’s subsidiary Piedmont is already a leading player in 331 APU MRO, providing services to some of the world's largest fleets with a proven track record of quality and turn-around time. This agreement positions TAT as the premier MRO services provider to the relevant fleets globally and presents a major growth opportunity for TAT. We look forward to expanding and strengthening the commercial cooperation with Honeywell in the future."

On Friday, TAT Technologies' share price jumped by 45% in New York, but yesterday, when the Tel Aviv Stock Exchange was closed for Yom Kippur, it fell back by 4%. The rise on Friday was on a very high volume: almost 16 million shares changed hands, 50 times the average turnover in TAT Technologies stock on Nasdaq. At the current share price of $5.6, the company has a market cap of NIS 124 million.

FIMI Opportunity Funds acquired control of TAT Technologies in 2013, and currently has a 59.2% stake in the company. This is FIMI's second round with TAT Technologies. In 2004, it bought a stake in the company for $8 million, and sold it to Kaman Holdings in 2007 for $40 million, as part of a deal in which Kaman bought the controlling interest from FIMI and from TAT's founders. In 2013, after Kaman Holdings went into receivership, FIMI won an auction to buy the controlling interest, paying NIS 125 million at a valuation of NIS 233 million, considerably higher than TAT Technologies' current market cap.

Up until Friday, TAT Technologies had fallen 20% since the beginning of 2020, against the backdrop of the devastating effect of the coronavirus pandemic on the global aviation industry. In the first half of the year, TAT Technologies revenue was $24 million, which compares with $46.9 million in the first half of 2019, and the company switched from a modest profit to a net loss of $1.8 million.

Published by Globes, Israel business news - en.globes.co.il - on September 29, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Ishay Davidi
Ishay Davidi
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