Bankrupt aircraft maker Hawker Beechcraft yesterday said that it has reached a $1.79-billion deal to sell its business jet and general aviation operations to China's Superior Aviation Beijing Co Ltd .
Under an exclusivity agreement signed with Superior Aviation, the Beijing-based aerospace manufacturer will acquire Hawker Beechcraft. The sale does not include Hawker Beechcraft Defense Co., which will remain a separate entity.
Hawker Beechcraft said Superior Aviation will make payments over the next six weeks to support ongoing operations at Hawker Beechcraft until the close of the transaction.
During the 45-day exclusivity period, Superior Aviation will conduct due diligence while the two companies negotiate definitive documentation of the transaction.
The sale would be subject to an auction even after both companies successfully negotiate a definitive agreement.
The deal is also subject to regulatory approvals from the Chinese and US officials, as well as from the bankruptcy court.
While Superior Aviation will get neither ownership nor control of Hawker Beechcraft Defense Co, it will get up to $400 million of the $1.79 billion purchase price in the event it is sold.
Hawker Beechcraft said that if the deal fails to materialise, it will proceed with bankruptcy reorganisation and emerge as a standalone entity with a more focused portfolio of aircraft.
Under the proposed deal, Superior Aviation intends to make Hawker Beechcraft its flagship investment, maintain its US headquarters, retain its current employee base and management team, while positioning the company for future growth at home and abroad.
Wichita, Kansas-based Hawker Beechcraft is a leading manufacturer of business, special mission, light attack and trainer aircraft for businesses, governments and individuals worldwide.
The company's major facilities are located in Wichita, with operations in Little Rock, Arkansas, Chester, UK, and Chihuahua, Mexico nad has built over 54,000 aircrafts since 1932 with more than 36,000 flying today.
It had net sales of $2.44 billion last financial year and delivered 291 business, military and general aviation aircraft in 2011.
Hawker Beechcraft was formed through the 1994 merger between Raytheon's Beech Aircraft Corporation and Raytheon Corporate Jets units. Raytheon sold the company in 2006 to private equity firms Goldman Sachs Capital Partners and Onex Partners.
The leveraged buyout left the company with huge debts, and its troubles were compounded by the global recession of 2008, where it found no buyers for its military planes and business jets.
After thousands of job cuts and defaulting on its interest payments, Hawker Beechcraft filed for bankruptcy in May. As of September 2011 the company had $2.14 billion of debt.
Superior Aviation is an aerospace manufacturer that engages in the research & development, production and sale of general aviation engines and parts.
It is 60 per cent owned by Beijing Superior Aviation Technology Corporation Ltd, a closely-held private entity, and 40 per cent by Beijing E-Town International Investment & Development Corporation Ltd., a company controlled by the Beijing municipal government.
Superior Aviation said that it has received the full support of the City of Beijing municipal government in completing the deal, and it is working to obtain all regulatory approvals from the Chinese central government.
But the transaction is subject to approval by the US Committee on Foreign Investment in the US and additional customary US regulatory reviews and approvals, which have in the past vetoed several sensitive acquisitions of US firms by Chinese companies.
Robert Steve Miller, CEO of Hawker Beechcraft, said, ''We believe a transaction with Superior would maximise value for Hawker Beechcraft and its stakeholders. Importantly, this combination would give Hawker Beechcraft greater access to the Chinese business and general aviation marketplace, which is forecast to grow more than 10 per cent a year for the next 10-15 years. We look forward to working toward a definitive agreement.''
Bill Boisture, chairman of Hawker Beechcraft Corporation, said, ''The decision to move forward with Superior was based on two key factors: the bid for the company was the most attractive we received during the strategic review process and the going-forward plan offered the most continuity for our business, allowing us to preserve jobs, product lines and our ability to maintain our commitments to our customers.''