Textron buys Beechcraft in $1.4 billion deal

Dec. 27--Cessna Aircraft's parent company, Textron, is acquiring Wichita's Beechcraft Corp. for approximately $1.4 billion in cash, the company confirmed Thursday evening.

"The acquisition of Beechcraft is a tremendous opportunity to extend our general aviation business," Textron chairman and CEO Scott Donnelly said in a statement. "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."

Beechcraft's King Air product line complements Cessna's Caravan and Citation line of jets, Donnelly said.

"This transaction represents an important step forward in the evolution of Beechcraft's business," Beechcraft CEO Bill Boisture said in a statement. "The team has worked tirelessly to strengthen our core business and to maintain our position as a leader in a highly competitive environment."

The sale is expected to close in the first half of next year, pending government approvals.

The transaction includes the assets of the Hawker 4000 and Premier IA type certificates along with Beechcraft's Plant 3. Those assets had been up for sale separately.

It's too soon to say whether Textron will operate Beechcraft and Cessna separately or merge them.

It's also unclear what will happen with employment levels, production sites, products or management.

"Decisions like that are way out there," said Textron spokesman Dave Sylvestre. "They're months out."

Textron intends to continue with Beechcraft branding, Sylvestre said.

"Part of the reason why you acquire a company like Beechcraft, there's a lot of brand equity," he said. "It's a well-known global brand."

Beechcraft employs 5,000 people, including 3,500 in Wichita.

"One of the first things you should expect Textron to do would be to appoint or form a transition team that would have the responsibility of from Textron's perspective, saying, 'OK, Now we own two of aviation's greatest long-term brands. We own two very large service networks, and we have a very large customer base in Cessna and a very large customer base in Beechcraft,' " Boisture said in a telephone interview with The Eagle.

The team will begin to form a plan on how best to market and to sell its products and to manage the collective supply chain in an efficient way "and begin to look for the right path forward with Textron as the parent," Boisture said.

The transition will take time.

"It's way too early to discuss jobs," he said. "I think it's way too early to discuss how costs will be eliminated from both companies in order to make this an efficient, effective investment for Textron."

Beechcraft's financial results will be blended into Cessna's results, said Textron's Sylvestre.

A transition team is being formed with members of both companies, he said.

With the sale, "you have two very strong general aviation companies owned by a common and strong parent that understands industrial manufacturing and understands the aviation industry," Boisture said. "So for Beechcraft, it's a step in the evolution of our business that gets us into a position of a strong experienced industry parent that we haven't been in since 2007."

That's when Raytheon sold what was then called Raytheon Aircraft Co. for $3.3 billion to Goldman Sachs and Onex Corp. to form Hawker Beechcraft.

The sale to Textron is good for Wichita, Boisture said.

"Now you have a New York Stock Exchange company owning two of Wichita's largest corporations," Boisture said. That will bring stability.

Beechcraft and Textron have little overlap in their products, he said.

Earlier this year, Beechcraft hired Credit Suisse to sound out potential buyers. Textron's Donnelly has long expressed interest in the company.

Beechcraft is owned by four large shareholders and numerous smaller shareholders. Some of those shareholders were creditors who received equity in the company as part of the settlement of claims during Chapter 11 bankruptcy proceedings. Beechcraft exited bankruptcy in February, after filing to restructure in May 2012.

Aviation analyst Wayne Plucker of Frost & Sullivan, has said the sale to Textron would be good for Wichita.

Beechcraft has good products, but it was too small of a player in a depressed market, Plucker said last week, after the Financial Times first reported the rumored sale. At the time, officials at both companies declined to comment on the report. And Cessna is only somewhat better, Plucker said, with sales of its light jets remaining weak.

A combined company could pick and choose its strongest offerings and prune back some weaker models, he said.

The sale offers Beechcraft an upside, Richard Aboulafia, an aviation analyst with the Teal Group, said last week. It will help stabilize the company in the long run, he said.

And for Cessna, it offers a chance to improve margins by selling a wider range of popular products more efficiently.

Hawker Beechcraft carried a debt load from the sale to Goldman Sachs and Onex Corp. in 2007. The downturn in the aviation market in 2008 led to the May 2012 bankruptcy. A potential buyer for the struggling company was found in China -- Superior Aviation Beijing Co. -- but that $1.79 billion deal fell apart.

In December 2012, the bankruptcy court approved a plan for the company to end jet production and emerge as a smaller, stand-alone company called Beechcraft Corp. The restructured company focuses on its King Air, Baron and Bonanza lines, its defense business and its after-market business.

Beechcraft emerged from bankruptcy in February.

In October, the company reported that it delivered more King Airs, Barons and Bonanzas in the first three quarters of 2013 than any year since 2008.

In August, Beechcraft received what it says is the largest general aviation propeller-driven airplane order in history. The company received an order from newly formed Wheels Up, a membership-based private aviation company for 35 King Air 350i turboprops to be delivered by mid-2015, with an option for 70 more as Wheels Up grows.

Beechcraft also said that it is raising production rates for 2014 to keep up with higher-than-planned orders.

The work that was done during bankruptcy and after its emergence created the company's substantial value, Boisture said.

"The transaction recognizes that that happened, and it recognizes that Beechcraft once again is a very valuable company," he said. "This is a recognition of the employees hard work."

Cessna, in the meantime, has posted losses through the first nine months of 2013. The company's deliveries were down 22 percent through the third quarter and its billings were down 26 percent, according to data from the General Aviation Manufacturers Association.

Besides Cessna, Textron also operates an Industrial and Finance arm and Bell Helicopter. Textron also formed a partnership with AirLand Enterprises to build the Scorpion, a multi-mission tactical military jet. The plane was developed and built in a Cessna facility in east Wichita. It took its first flight this month.

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Reach Molly McMillin at 316-269-6708 or mmcmillin@wichitaeagle.com. Follow her on Twitter: @mmcmillin.

 

 

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