The Insider

DOJ requires TransDigm to divest SCHROTH

December 21, 2017 at 12:46 PM

The Justice Department said today it will require TransDigm to divest SCHROTH businesses it acquired from Takata to "restore competition in markets for several types of restraint systems used on commercial airplanes."

TransDigm acquired the SCHROTH businesses in February of this year in a $90 million transaction, according to DOJ.

"The Justice Department's Antitrust Division filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia challenging the consummated acquisition," DOJ said in a statement. "At the same time, it filed a proposed settlement that, if approved by the court, would resolve the Department's competitive concerns."

TransDigm said in its own statement today it "respectfully disagrees" with DOJ's position.

However, the company "decided that given the size of the deal, the expense and burden of continued investigation and the uniqueness of the situation, that it was prudent to settle the matter and agree to divest the SCHROTH business."

After undertaking a search process, TransDigm said it has agreed to sell the SCHROTH businesses through a management buyout to private-equity fund Perusa Partners Fund and SCHROTH managers from Germany and the United States.

TransDigm has come under scrutiny in recent months. Earlier this year, Rep. Ro Khanna (D-CA) sent a letter to the Pentagon inspector general's office seeking an investigation into the company "for potential waste, fraud, and abuse in the defense industrial base."

Khanna wrote that he has been monitoring reports that suggest TransDigm "has been operating as a hidden monopolist by (i) engaging in a series of unreasonable price increases of products for which it is the only supplier, (ii) disguising its cost structure and identity from Pentagon procurement officers, and (iii) unreasonably hiking prices to benefit shareholders and executives."