The impact of COVID-19 has led composites maker Hexcel Corp. to call off its planned merger with aerospace and industrial firm Woodward Inc.
The merger would have created an industrial firm with annual sales of more than $5 billion. The termination, announced April 6, was approved by the boards of directors of both companies.
The decision to call off the merger "is in response to the increasing impact on both the aerospace and industrial sectors and global markets broadly, resulting from the health crisis caused by the [COVID-19] pandemic," officials said in a news release.
The pandemic "has resulted in a need for each company to focus on its respective businesses and has impacted the companies' ability to realize the benefits of the merger during these unprecedented times," they added.
In a joint statement, top executives Nick Stanage of Stamford, Conn.-based Hexcel and Tom Gendron of Fort Collins, Colo.-based Woodward said that while both believed in the benefits of combining the firms, they mutually concluded that because of market uncertainty, it "would not be prudent" to continue to pursue the combination.
"Although we are disappointed with this outcome, we are confident this is the right decision for our customers, our shareholders and our employees," they said.
Ending the merger "allows each of us … to remain strong and closely connected with our customers and supply chains during these unparalleled times," Stanage and Gendron added in the release.
Neither party will be required to pay the other a termination fee as a result of the decision.
Hexcel is a leading advanced composites company, producing structural materials such as carbon fiber used in commercial aerospace, space and defense and industrial applications. Woodward is an independent supplier of control system solutions and components for the aerospace and industrial markets.
The merger was announced Jan. 12. The combined company would have been called Woodward Hexcel and would have been based in Fort Collins. With $5.3 billion of expected annual revenue, it would have been one of the largest independent global aerospace and defense suppliers.
Stanage would have served as CEO of the combined firm, with Gendron as executive chairman. The combined firm would have employed more than 16,000 globally.
Hexcel also announced April 6 that because of current market conditions, the firm has taken steps to reduce costs, including a hiring freeze and curtailing of capital expenditures. Hexcel also has put in place enhanced cleaning and sanitation procedures at all of its manufacturing sites.
Like many public firms, Hexcel has seen its per-share stock price battered in 2020 by the impacts of COVID-19. The price began the year around $73 but was at $31.30 in early trading April 14 for a decline of 57 percent.
Hexcel posted sales of $2.36 billion in 2019, up almost 8 percent from 2018.