By Susanna Ray and Thomas Black - Jul 10, 2012 4:36 AM GMT+0700
Hawker Beechcraft Inc., the business- jet maker owned by Goldman Sachs Group Inc. (GS) and Onex Corp. (OCX), may draw more bids in an auction after agreeing to sell itself to Superior Aviation Beijing Co. for $1.79 billion.
Superior will make payments over the next six weeks to help keep bankrupt Hawker in business until the deal closes, according to a statement today from the companies. The sale, which doesn’t include the planemaker’s defense business, remains subject to U.S. Bankruptcy Court approval and the auction process.
Hawker traces its history partly to Walter and Olive Beech, who started Beech Aircraft Corp. during the Great Depression in 1932, according to the company’s website. Photographer: Larry W. Smith/Bloomberg
Hawker Beechcraft sought bankruptcy protection in May after the company and other private-jet manufacturers struggled with lower demand following the recession. The planemaker’s debt included a term loan and notes used for the portion of its 2007 takeover price of $3.3 billion that wasn’t covered by $1 billion cash from buyers Goldman Sachs and Onex.
“Superior has had a long-standing interest in the commercial aircraft business of Hawker Beechcraft, having first approached the company several years ago” about a strategic partnership, said Chief Executive Officer Steve Miller. The merger would provide more “access to the Chinese business and general aviation marketplace, which is forecast to grow more than 10 percent a year for the next 10 to 15 years.”
Perella Weinberg
Hawker retained Perella Weinberg Partners LP as a financial adviser in December and hired Miller, a turnaround specialist, in February. Before its May 3 bankruptcy filing, the company and Perella Weinberg identified 35 potential buyers from strategic purchasers to private-equity firms, according to a court filing.
Net losses totaling more than $900 million in two years due to shrinking plane sales and declining U.S. military contracts prompted Hawker’s bankruptcy. The company received eight bids from mid-May through mid-June, according to the filing.
Hawker’s aircraft include the Hawker 4000 business jet and the Beechcraft King Air propjet. The company competes with planemakers including Textron Inc. (TXT)’s Cessna Aircraft Co., Embraer SA (EMBR3), Gulfstream Aerospace Corp. and Bombardier Inc. (BBD/B)
Textron is interested in buying Hawker for its propeller- driven business planes and military training aircraft, Chief Executive Scott Donnelly said in an interview today at the Farnborough air show near London before Superior’s announcement.
Textron Interest
Donnelly said Textron sees the most value in the Beechcraft King Air planes and the T-6, known as the trainer because the military uses the planes as a training aircraft. The Hawker 4000 and 900, which are jet planes that carry about 10 passengers, are struggling against the competition, he said.
“There are problematic parts and there are good parts. For the right number, you could manage that and we could make it a win for our shareholders,” Donnelly said. “But there’s no reason for a company like ours to overpay for that asset.”
Mahindra & Mahindra Ltd. (MM), India’s biggest maker of utility vehicles, also was considering bidding for the planemaker, a person with knowledge of the matter said July 5. Mahindra also builds turboprop aircraft, as does Hawker.
The Indian company has majority stakes in component maker Aerostaff Australia and Gippsland Aeronautics, and has been in talks with India’s National Aerospace Laboratories on possibly partnering for a regional jet.
Attractive Bid
Bill Boisture, chairman of Hawker Beechcraft, said the decision to move forward with the Chinese bidder was “based on two key factors: the bid for the company was the most attractive we received during the strategic review process and the going- forward plan offered the most continuity for our business.”
Superior is committed to maintaining Hawker Beechcraft’s strong presence in the United States as well as its employee base and management team, Boisture said.
Hawker traces its history partly to Walter and Olive Beech, who started Beech Aircraft Corp. during the Great Depression in 1932, according to the company’s website. With designer Ted Wells, they built the Beech Model 17, a biplane for business executives that sold for about $15,000, according to the U.S. Centennial of Flight Commission.
A reorganization plan that Hawker filed June 30 would give control of the company to secured creditors holding debt valued at $921.6 million, canceling other interests in the company. New York-based Goldman Sachs and Toronto-based Onex each owned 49 percent of Hawker Beechcraft stock, while former managers and directors held the remainder.
The company said it would borrow an unspecified amount to exit court protection and repay a $400 million loan that financed operations while in bankruptcy.
To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net
To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net
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