By Rajesh Kumar Singh and Shivansh Tiwary
Sept 8 (Reuters) - GE Aerospace said on Tuesday it would buy castings supplier Consolidated Precision Products for $11.75 billion, bringing a key part of its engine supply chain in-house as it races to expand production capacity.
Supply-chain constraints have made it harder for engine makers to keep pace with strong demand for new engines and aftermarket parts and repairs. While conditions have improved, castings remain a key pressure point for the industry.
For GE Aerospace, the deal aims to tackle that constraint directly. The company has a large backlog stretching into the next decade and is looking to secure enough capacity to meet demand already on its books.
The acquisition is GE Aerospace's largest since it became a standalone company in 2024.
"Investing in mission-critical casting capacity is needed to support the strong simultaneous demand across commercial engines, aftermarket and defense," GE Aerospace CEO Larry Culp said.
CASTINGS CONSTRAINT
CPP is one of the world's largest makers of precision sand castings, complex metal parts made by pouring molten material into molds.
It is a key supplier to GE's LEAP and GEnx commercial engines and makes parts for nearly every major current-generation commercial aircraft program. About 70% of its revenue comes from commercial and defense engines.
GE said it expects CPP to generate about $2 billion in revenue in 2027.
GE also expects its demand for airfoils to rise more than 30% by 2030 from 2026 levels. Airfoils include turbine blades and vanes that operate in some of the hottest parts of an engine.
That demand is coming from two fronts. Culp has said GE and its suppliers face competing demands from aircraft makers seeking more new engines and airlines needing more parts and repairs. The same supply chain serves both markets, requiring suppliers to keep raising output to meet demand on both fronts.
The announcement of the deal comes days after SpaceX CEO Elon Musk touted his company's ambitions to manufacture turbine blades to cater to its own power needs.
GE said it expects to raise CPP's output by improving factory yields and machine use while cutting scrap and rework.
The CEO of leasing company AerCap, Aengus Kelly, said the deal was important because engines remain a major constraint on aircraft production.
"You want to be in control of that critical part of your supply chain," Kelly told CNBC of castings and forgings, adding that an engine maker such as GE could take a longer-term view of investments needed to expand capacity.
Vertical Research analyst Robert Stallard said the deal made strategic sense given continued tightness in engine castings.
The acquisition could raise questions for other aerospace companies that rely on CPP for parts. Stallard said it remained to be seen whether the deal would affect CPP's non-GE customers.
GE Aerospace shares were up about 0.6% in midday trading, while Howmet Aerospace, another major aerospace castings supplier, fell about 6.3%.
MORE THAN CAPACITY
GE also sees the deal as a way to bring new engine technology into production faster.
The company said its enhanced airfoil technology can lower metal temperatures inside engines, helping improve durability and efficiency. The technology can be used on the LEAP as well as future engines.
By bringing airfoil design and manufacturing closer together, GE expects to shorten development times and make it easier to ramp up production of new parts.
The deal values CPP at about 26 times its expected 2027 core profit before benefits GE expects from combining the businesses, falling to about 18 times after including them.
GE will fund $7 billion of the purchase with cash and the rest with new debt. The deal is expected to close in the second half of 2027.
(Reporting by Rajesh Kumar Singh in Chicago and Shivansh Tiwary in Bengaluru; Editing by Shilpi Majumdar and Bill Berkrot)
