Textron adds Beechcraft to its aviation stable

  • Article by: JULIE JOHNSSON and THOMAS BLACK , Bloomberg News
  • Updated: December 29, 2013 - 1:14 PM
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FILE - In this Monday, Feb. 18, 2013, file photo, aircraft are worked on on the assembly line at Beechcraft in Wichita, Kan. Textron Inc., the parent company of Cessna Aircraft, announced Thursday, Dec. 26, 2013, that it has reached an agreement to buy Beechcraft Corp. for approximately $1.4 billion.

Photo: Jaime Green, Associated Press

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Textron Inc., the manufacturer of Cessna aircraft, will boost its lineup of propeller-driven aircraft after reaching a deal to buy Beechcraft Corp. for $1.4 billion, as it seeks to counter a slump in business-jet sales.

The Providence, R.I.-based company will purchase all outstanding equity interests in Beech Holdings LLC, the parent of Beechcraft, it said in a statement Friday. The deal, which includes the repayment of Beechcraft’s working capital debt, will be financed by a combination of available cash and as much as $1.1 billion in new debt.

Adding such Beechcraft models as the twin-engine King Air will complement a Cessna lineup that ranges from two-seaters to the ­Caravan ­turboprop used to fly ­people and cargo to small airports. That market segment is less competitive than private jets, where Cessna has struggled because it doesn’t build the large long-range planes now favored by corporate buyers.

“It’s definitely a pretty good overall fit,” said Eric Hugel, an analyst at S & P Capital IQ Inc. in New York, in a telephone interview. “It looks like the deal is reasonably priced and there should be a lot of opportunity to squeeze out costs.”

Beechcraft had revived an auction process a year after its deal to sell itself to a Chinese jetmaker ­collapsed. It had drawn takeover interest from at least three suitors, including Brazil’s Embraer SA, India’s Mahindra & Mahindra Ltd. and Textron.

Squeezed by waning private-jet demand and a drop in U.S. arms spending, the former Hawker Beechcraft filed for bankruptcy in May 2012. The Wichita, Kan.-based company left court protection in February and exited the jet business with a pledge to keep servicing the planes.

“It’s an extremely good fit in terms of product as we add King Air,” said Scott Donnelly, Textron chairman and CEO, in a conference call Friday with analysts. “It allows us to strengthen our service business.”

Textron shares gained 1.1 percent to $36.61 on Friday in New York. The stock has risen 48 percent this year.

Beechcraft will bolster an aviation business that accounted for 60 percent of Textron’s $12.2 billion in 2012 revenue. Products including the Commando four-wheeled armored vehicle and E-Z-Go golf carts make up the remainder of its sales.

The general aviation unit, led by the King Air brand, will account for 53 percent of Beechcraft’s estimated revenue of $1.8 billion this year. The service unit will account for 31 percent of revenue and defense, led by the T-6 military training aircraft, will make up 16 percent, Textron said. Beechcraft has 35,000 aircraft in service.

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