Aerospace control system solutions provider Woodward and advanced composites company Hexcel Corporation have signed an all-stock merger agreement.

The merger between the companies will form an integrated systems provider for the aerospace and industrial sectors.

To be named as Woodward Hexcel, the merged entity is expected to create one of the world’s leading independent aerospace and defence suppliers in terms of revenue.

The Colorado-headquartered Woodward Hexcel will have a combined workforce of more than 16,000 employees with operations across 14 countries on five continents.

The transaction will position the new entity to address growing customer demands for aircraft aerodynamics, energy efficiency, enhanced safety, and emissions and noise reduction.

On completion of the deal, around $250m is likely to be spent by the combined company on research and development in the first full year. In addition, it will focus on aerodynamics, propulsion, and energy efficiency innovation, as well as on emerging technologies to support next-generation aerospace customer programmes.

Under the terms of the agreement, the common stock shares of Woodward shareholders will remain unaltered in the new entity while Hexcel shareholders will get fixed exchange ratio of 0.625 shares of Woodward common stock for every Hexcel common stock.

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Hexcel chairman, chief executive officer and president Nick Stanage will act as chief executive officer of the integrated company. Woodward chairman, chief executive officer and president Tom Gendron will hold the executive chairman position until the merged company’s first anniversary.

Gendron said: “Our two companies are each independently working toward addressing the sustainability and efficiency needs of our customers.

“This merger accelerates our technology investments and creates greater benefits and growth opportunities than either company could have achieved alone.

“Our complementary cultures and shared commitment to operational excellence and customer satisfaction, together with our enhanced financial strength, will position us to better serve our OEM and aftermarket customers.”

Depending on the approval of the shareholders of both the companies and meeting other customary closing conditions, the deal is expected to close during the third quarter of this year.

Once completed, current Woodward shareholders will hold a majority share of 55% while the remaining 45% will be owned by Hexcel shareholders.

Goldman Sachs & Co and JP Morgan Securities are acting as exclusive financial advisers to Hexcel and Woodward, respectively.

Wachtell, Lipton, Rosen & Katz and Wilson Sonsini Goodrich & Rosati are serving as legal counsellors to Hexcel and Woodward, respectively.