Textron to acquire Beechcraft for $1.4 bn
28 Dec 2013
Diversified US industrial conglomerate and the maker of Cessna planes, Textron Inc has agreed to buy aircraft maker Beech Holdings LLC, the parent company of Beechcraft Corp, for approximately $1.4 billion in cash, aiming to expand significantly the company's aviation business.
Wichita, Kansas-based Beechcraft is a leading maker of business, special mission and military aircraft. The aircraft maker filed for bankruptcy protection in May 2012 due to diminishing sales and mounting debt burden.
The company exited from bankruptcy in February and is currently controlled by private equity firms Centerbridge Partners, Sankaty Advisors and Angelo Gordon & Co who own about 90 per cent of Beechcraft. Prior to bankruptcy, the company was owned by Goldman Sachs Group Inc and Onex Corp.
Beechcraft's 2013 revenue is estimated to be around $1.8 billion. With more than 36,000 aircraft in service, Beechcraft supports its installed base of Hawker business jets, King Air turboprops and Beechcraft airplanes through an extensive global network of company-owned and authorised service centers.
Providence, Rhode Island-based Textron's businesses include Bell Helicopter, Cessna Aircraft, defence and industrial products and Textron Financial and Textron Systems.
The $12-billion company's activities are spread over 25 countries and it has around 33,000 employees.
Textron chairman and CEO Scott Donnelly said: ''From our customers' perspective, this creates a broader selection of aircraft and a larger service footprint - all sharing the same high standards of quality and innovation.''
''The iconic King Air product line perfectly complements our Caravan and Citation jet line-up and our combined global service network will deliver the superior level of services expected by our Cessna, Beechcraft and Hawker customers,'' he added.
''Textron's experience in the industry and its willingness to invest in and maintain the iconic Beechcraft brand make it an ideal parent company, one that will help us continue to satisfy our customers and meet our business objectives at a faster pace,'' Beechcraft CEO Bill Boisture commented.
Textron plans to fund the acquisition through cash in hand and up to $1.1 billion in new debt.
Holders of equity interests in Beechcraft parent Beech Holdings have delivered sufficient proxies in favour of the transaction, Textron said.
The transaction is expected to close in the first half of next year, subject to customary closing conditions and regulatory approvals.
According to some analysts, the deal is reasonably priced and provides opportunity to cut costs to the tune of $75-$85 million annually.
In October, Bloomberg reported that three companies, including India's Mahindra & Mahindra, Brazil's Embraer and Textron, had shown interest in Beechcraft, following the collapse of a deal to sell the company to China's Superior Aviation Beijing Ltd for $1.79 billion. (See: Mahindra & Mahindra among others interested in Beechcraft Corp)
JP Morgan Chase & Co acted as the exclusive financial adviser to Textron on the deal, besides providing committed financing in connection with the acquisition. Beech Holdings was advised by Credit Suisse AG and Morgan Stanley.
