News Article

Defense Contractor Tolo to Be Acquired
Date: Sep 19, 1997
Source: latimes ( click here to go to the source)

Featured firm in this article: Tolo Inc of Irvine, CA

IRVINE -- Defense and aerospace contractor Tolo Inc. said Thursday it has agreed to be acquired by aircraft parts maker Rohr Inc. in an all-cash deal.
Terms were not disclosed, but sources said Rohr agreed to pay $24 million.

Rohr, which itself had been an acquisition target until the deal with an unidentified suitor fell through earlier this week, is buying Tolo to capture a patented manufacturing technology developed by the Irvine aerospace company.

The deal also supplies Rohr with a critical component used in one of the jet engine parts it makes.

Tolo is expected to post annual revenue of $25 million for its 1997 fiscal year, ending Sept. 30, and has said it anticipates boosting annual sales to almost $75 million by the end of its fiscal 1999.

Tolo President John Terranova said his company will operate under its own name as a wholly owned subsidiary of Chula Vista-based Rohr.

The acquisition, expected to close next month, should not affect employment at Tolo, which has been growing steadily in recent years after riding out the defense industry recession of the 1980s. Tolo has added 80 new employees in the past two years and now employs 220.

Terranova said Tolo has been approached several times in recent years by potential buyers.

Company officials decided to talk to Rohr, he said, "because we have now reached the point where we had to look at going public or being acquired in order to gain the funds to finance our continued growth.

Rohr, which broached the deal about four months ago, was negotiating its purchase of Tolo even as it was being sought itself by another defense company--believed to be Boeing Co. or Lockheed-Martin Corp.

Terranova said that Tolo wasn't told of the possible sale of Rohr until that deal fell through. "We weren't aware they were being squired by a suitor of their own," he said.

But after Rohr announced Monday that talks to acquire it for $850 million had been terminated, company officials "told us that their suitor was well aware of our negotiations and had given them the go-ahead to pursue us," Terranova said.

Privately held Tolo was started 40 years ago as an aerospace toolmaker, but quickly expanded into metal and composite fabrication. It makes products as diverse as cast iron bomb casings for the Defense Department and avionics equipment racks for the MD-11 commercial airliner.

In 1995 Tolo unveiled its proprietary "grid-lock" technology for making complex parts out of a few interlocking pieces, enabling it to slash manufacturing costs and reduce the weight of many items while increasing product quality.

It won its contract to supply a jet engine component for Rohr that year by using the grid-lock system to produce the parts for half what Rohr had been paying its previous supplier.

Terranova said Tolo does about 60% of its work under government contracts and 40% for commercial customers.

The company's skilled employees and "growing reputation as an innovator in the field of structural technology and other advanced manufacturing techniques" made it a desirable acquisition for Rohr, said company president and chief executive Bob Rau.

Rohr designs, makes and markets aircraft engine components and noise suppression systems for large commercial aircraft. The company reported fiscal 1997 revenue of $944 million.