Aviation giants grab production capacity upstream! GE Aerospace (GE.US) swallowed up nearly $12 billion in CPP, and the strategic value of precision castings surfaced

The Zhitong Finance App learned that GE Aerospace (GE.US), the legal entity left behind after completing the split and the core asset of the aerospace business, said on Tuesday local time that it had agreed to acquire Consolidated Precision Products (“CPP”) for US$11.75 billion to expand its full control over the special precision casting supply chain for commercial aircraft engine systems, military aerospace equipment, and industrial gas turbines.

The aerospace manufacturer will acquire CPP from private equity firms Warburg Pincus and Berkshire Partners. GE Aerospace plans to fund the acquisition with $7 billion in cash, and finance the rest through additional debt.

The Cleveland, US-based CPP uses superalloys, titanium, aluminum, magnesium, and steel to manufacture complex components for industrial systems. The precision castings and precision components it manufactures are mainly used in commercial and military aircraft systems, military weapon systems, helicopters, business jets, and large-scale gas power generation equipment. CPP has more than 20 facilities around the world and employs around 6,600 people. GE Aviation has been purchasing parts from the company for over 15 years.

Aviation giants grab production capacity upstream! GE Aerospace's nearly $12 billion merger and acquisition, revaluation of precision castings heats up

The core meaning of this acquisition of 11.75 billion US dollars, or about 12 billion US dollars, is to transform the key supply bottleneck of aero engines into GE Aviation's own controllable manufacturing capacity. In the second quarter of 2026, GE Aviation's commercial engine and service business engine deliveries increased 26% year-on-year, and service revenue also increased 26%. Production of new engines and maintenance of existing fleets competed for parts supply at the same time. Incorporating CPP into the group is expected to strengthen collaboration between casting production, quality management and engine design, improve delivery reliability, and support mass production of next-generation engine technology.

The acquisition comes at a time when aircraft engine manufacturers are facing strong demand for new equipment and replacement parts while struggling to cope with supply chain constraints. GE Aerospace's inclusion of a major casting supplier could help GE Aerospace increase production, improve quality control, and launch new engine technology more quickly.

For investors, the deal represents a major bet on vertical integration in a context where engine delivery and aftermarket growth depend in part on the supply of highly specialized components. GE Aviation expects the acquisition to boost adjusted earnings per share and free cash flow in the first year after the acquisition. However, relatively high acquisition valuation multiples, additional debt, and long waiting periods before delivery also posed valuation, financing, and consolidation risks.

After accounting for the expected net synergy, GE Aerospace's valuation of CPP is approximately 18 times its anticipated profit before interest, tax, depreciation and amortization (EBITDA) in 2027. If these benefits are not included, the valuation is approximately 26 times EBITDA, so successful cost savings and operational improvements are critical to the financial return of this transaction.

The company plans to apply its lean operation system called FLIGHT DECK to CPP operations. GE Aerospace anticipates that this merger will increase manufacturing capacity, improve production reliability, and enhance coordination between component design and manufacturing.

Management said that although the acquisition will use cash and increase borrowing, the deal will not change GE Airlines' current capital allocation plan.

The two companies expect the acquisition to be completed in the second half of 2027, subject to regulatory approval and customary delivery conditions.

From purchasing parts to mastering production capacity

The core significance of this acquisition of 11.75 billion US dollars, or about 12 billion US dollars, is undoubtedly to transform the key supply bottleneck of aero engines into GE Aerospace's own controllable manufacturing capacity.

GE Aerospace spent nearly $12 billion to acquire the Cleveland-based CPP. For the aero engine industry chain, precision casting suppliers with mature manufacturing processes, customer certification, and stable batch delivery are becoming an important strategic resource for engine manufacturers to ease supply bottlenecks, expand production, and fulfill orders.

For space exploration and NASA defense space infrastructure, the impact of this acquisition on the commercial aerospace industry chain in the broad sense is mainly reflected in upstream precision manufacturing capabilities. CPP has mastered complex casting manufacturing technology such as superalloys and titanium alloys, and components such as turbine pump housings for liquid rocket engines also have precision casting applications, so its material and process accumulation has the potential to extend to space equipment. Judging from this, production expansion and process improvements may enhance related supply capacity, but entering specific rocket projects still depends on customer certification and product verification. Currently, the disclosed acquisitions are still focused on commercial aviation aircraft, defense and industrial gas turbines, and it is not yet possible to confirm revenue related to new commercial space exploration based on this.

GE Aerospace and GE Vernova (GEV.US) both originated from the original American industrial giant General Electric, but now they are independent listed companies. General Electric first spun off GE Healthcare (GEHC.US) in January 2023, then split the energy business GE Vernova on April 2, 2024; after the spin-off was completed, the remaining parent company officially transformed into GE Aerospace (GE Aerospace) and continued to use GE's NYSE code “GE”.

The business and investment logic of these major companies born out of General Electric has also been completely divided. GE Aerospace focuses on commercial and military aviation engines, spare parts and maintenance services, and the core profit is high-viscosity after-sales cash flow brought about by huge installed capacity; GE VerNova undertakes the original GE's gas power generation, wind power, power grid and electrification business. Currently, gas turbines, which are extremely scarce in global AI data center construction, are an important business. Their valuation is more driven by global electricity demand, AI data center construction processes, gas power generation expansion, and grid upgrades.

The biggest difference between GE Aerospace and General Electric in the past is that the business has shrunk from a diversified industrial complex to a pure aerospace company. The original GE spanned the fields of aero engines, gas power generation, wind power, power grids, medical equipment, and finance.