Canadian aerospace parts supplier Groupe Meloche is buying France’s Groupe Rossi Aéro, pushing into Europe at a decisive moment for aircraft manufacturing as the industry tries to meet high demand against a backdrop of external pressures.
The Beauharnois, Que.-based company, which supplies aircraft structure components and engine parts for Bombardier Inc. BBD-B-T and Pratt & Whitney among others, is taking over the business from Mecachrome SAS for an undisclosed sum. It will reach critical scale with the deal, according to a statement released Monday.
Adding Groupe Rossi will create a combined company with $250-million in annual revenue, more than 900 employees, and an industrial footprint spanning eight sites in Quebec and the region around Toulouse in southern France.
“It’s a big leap for us,” said chief executive officer Hugues Meloche, whose father started the company in 1974 after chancing upon a warehouse filled with abandoned machining equipment. When Groupe Rossi came on the market, “We said ‘Wow, that’s an opportunity to get closer to Airbus,’” he said. “Strategically, being close to a customer has always paid off.”
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The deal reflects a wider push from Canada and its allies to strengthen domestic and shared industrial capacity in aerospace. And it shows that mid-sized aviation suppliers are working to bulk up to meet the needs of larger original equipment manufacturers such as Boeing and Airbus EADSY, which are desperate to boost the stability and resilience of their supply chains.
It also mirrors a broader movement by Canadian business and political leaders to pivot toward Europe in a bid to lessen dependence on the United States. In the latest example, Toronto-based AI company Cohere announced late last month that it is merging with German-based AI startup Aleph Alpha to create what they called a “transatlantic AI powerhouse.”
Meloche already supplies Airbus, notably on the A220 airliner built in Mirabel, Que., which the plane maker took over from Bombardier in 2018. But with Airbus’s ownership, decision making for the program has shifted somewhat to its operational headquarters in France, with an impact on the supplier base as well, Mr. Meloche said in an interview.
Meloche started losing a few parts on the A220 program and had to do something to bolster that relationship, the CEO said. Establishing a European footprint was the solution and could lead to work on other Airbus programs, he said.
Airbus’s main global hub for commercial aircraft assembly in Toulouse is a short drive from Groupe Rossi. Fighter jet maker Dassault Aviation, another potential customer Meloche intends to target, is also based in France.
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For Meloche, the deal brings customer as well as geographic diversification. Boosting business with Airbus will give the company three big clients generating roughly the same volume of work for the supplier, namely Airbus, CFM International and RTX’s Corp.’s Pratt & Whitney, Mr. Meloche said.
It also adds new manufacturing capability. Both Meloche and Groupe Rossi are specialists in computer numerical control machining. But while Meloche works on long-term contracts, Rossi is known more as a “speed shop” that can make parts quickly on demand, delivering in days what it might take others weeks to ship out.
“The nice thing about it is when delivery time is the main driver for the customer, price is no object,” Mr. Meloche said. “So, we kind of like that. They do good margins.”
In a joint report on the global commercial aircraft supply chain last October, consultancy Oliver Wyman and airline trade group IATA said grounded aircraft, delayed deliveries and escalating maintenance and leasing costs are “clear symptoms of a system under strain.” Orders for new planes are streaming in but the big manufacturers and their suppliers are struggling to recruit enough workers while also dealing with other headwinds, such as finding stable sources of raw materials.
Quebec private-equity company Novacap is the majority shareholder of Meloche, which also has the backing of the Quebec government and Export Development Canada. American private-equity firm, Platinum Equity Advisors, bought Canadian aircraft landing gear maker Héroux-Devtek Inc. in a $1.35-billion deal that closed last year.
“With Novacap, we’ll have the capital to do bigger acquisitions,” building on three other deals done since 2019, Mr. Meloche said.
“We want to be a Canadian $1-billion company” on top-line revenue, the CEO said. “I won’t quit until I’ve done that. And there’s space for it. ... There are too many small companies in Canada. There has not been enough consolidation.”