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Groups bid for Raytheon Aircraft

Three leveraged-buyout firms have emerged as finalists to buy Wichita-based Raytheon Aircraft Co.


September 19, 2007
By Carey Fredericks

Three leveraged-buyout firms — including Canada's Onex Corp. –have emerged as finalists to buy Wichita-based Raytheon Aircraft Co.The groups have submitted final bids for the company, industry sources have said.

Onex Corp., which bought Boeing Wichita's commercial aircraft division in 2005 and formed Spirit AeroSystems, has teamed with Goldman Sachs to submit a bid, say sources who spoke on condition of anonymity. The team is bidding against financial investment firms Carlyle Group and Cerberus Capital Management. Both firms also have aerospace holdings.

"They're just buying it as an investment with the idea they can make money on it over time," Paul Nisbet, JSA Research aerospace and defense analyst, said of the three bidders. Raytheon Aircraft officials declined to comment. Onex, Carlyle and Cerberus officials also declined to comment.

The asking price for the maker of Beechcraft and Hawker aircraft, which employs more than 6,300 in Wichita, is about $3 billion, sources say. One source called the sale "imminent," saying a deal could be announced any day. Others say they expect an announcement sometime before the end of the year.

"It's an economic issue," said Cai von Rumohr, aerospace and defense analyst with SG Cowen Securities. "If they get $2.5 billion-plus, I would think they would sell." "All these private equity guys have a lot of money, and they've got to put it to work somewhere."

A good time to sell

Raytheon is selling at a time when the long-term outlook for business jets looks promising. International sales are growing and the market is expanding.

When Jim Schuster, Raytheon president, chairman and chief executive, joined the company in 2001, it was losing money. It's now making a nice profit, said David Strauss, UBS aerospace and defense analyst. "Jim Schuster has done a great job of turning that business around," Strauss said.

And Raytheon Aircraft has a lot of expensive research and development costs behind it, which makes it more attractive to buyers, he said. For example, this week it received type certification for its new Hawker 4000.

But officials of Raytheon Inc., the planemaker's parent company, have long said that its Wichita aircraft division is not part of its core business. It announced in July that it would begin pursuing a sale of the company it bought from Beech Aircraft in 1980.