Dec. 28--Textron's purchase of Wichita's Beechcraft Corp. is an excellent fit for the company that owns Cessna Aircraft, but it will require "restructuring and optimization of costs," Textron's top executive said.
"Clearly, we need to take actions necessary to make Cessna and Beechcraft profitable and healthy businesses," Scott Donnelly, Textron CEO, said Friday in an interview with The Eagle.
That includes continuing to invest in the companies' product lines and service businesses as well as restructuring, Donnelly said. The restructuring will likely include some job cuts, he said.
"I would expect that," Donnelly said.
"We'll have to look at the general and administrative costs" and how to manage two global service networks, he said. Beechcraft and Cessna are two major aviation businesses with a full structure of general and administrative functions.
"And we'll need to rationalize that," Donnelly said.
Decisions will be made over time.
"It's too early to say anything definitive," he said. "We have a lot of work to do."
Textron and Beechcraft announced Thursday night that Textron would buy Beechcraft for $1.4 billion, and on Friday, Donnelly fielded questions about what the acquisition might mean for employees of Beechcraft and Cessna, and for the city of Wichita.
Besides employment, a variety of issues must be worked through, Donnelly said, such as whether Beechcraft will operate as a division of Cessna or as a stand-alone company. Also up for review are production sites, management and what costs will be targeted for reductions or elimination.
Beechcraft CEO Bill Boisture, Cessna CEO Scott Ernest and Donnelly will put together a transition team to "lay out what's the right way to structure things and the right way to rationalize things," Donnelly said.
"I appreciate that this will be a big question mark for a lot of employees," he said.
Long-term, the acquisition will be good for Wichita, Donnelly said.
"There's a long, long history here with Cessna and Beechcraft," he said.
Clyde Cessna and Walter Beech were partners in Travel Air during the 1920s.
"These guys started together, and they're back together," Donnelly said.
The merger "provides a very comprehensive line of products and services that are all based in Wichita, Kansas," Donnelly said. "I think it's good for Wichita, and it's good for our customers."
The City of Wichita said in a release that the transaction is of great interest to the city.
"Our city's reputation as the Air Capital of the World has been built on the solid business decisions of our aviation industry," according to a joint statement by Mayor Carl Brewer and members of the City Council. "We fully expect that the Textron/Beechcraft merger will result in a positive outcome for the individual businesses and the community as a whole."
Textron has had its eye on Beechcraft for several months. Beechcraft had revived a sale process a year after a deal to sell to Superior Aviation Beijing Co. in China -- during Beechcraft's bankruptcy restructuring -- fell apart.
"We always felt it was a great lineup in terms of products," Donnelly said. "The King Air is a great product and a terrific brand."
The King Air complements Cessna's Caravan and Citation jet products, officials said.
Textron also has an interest in expanding into the military marketplace. The potential for Beechcraft's AT-6, the attack version of its military trainer "is very good," Donnelly said.
Under the terms announced Thursday, Textron is to acquire Wichita's Beech Holdings, the parent company of Beechcraft, for approximately $1.4 billion. The transaction is expected to close in the first half of 2014 subject to regulatory approvals.
The majority of Beechcraft's investors who hold enough equity to vote have approved the deal, the company said.
To close the transaction, Textron intends to finance up to $1.1 billion of new debt, including a five-year bank loan, and use available cash.
The acquisition is a clear example of Textron's commitment to business and general aviation, Cessna president and CEO Scott Ernest said in a statement.
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