Textron to Buy Beechcraft for $1.4 Billion

  • Dec 28, 2013 10:52am GMT

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, Rhode Island-based company will purchase all outstanding equity interests in Beech Holdings LLC, the parent of Beechcraft, it said in a statement yesterday. 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 Beechcraft models such 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.

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, Kansas-based company left court protection in February 2013 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,” Textron Chairman and Chief Executive Officer Scott C. Donnelly said in a conference call today with analysts. “It allows us to strengthen our service business.”

Textron will take over service for Hawker jets and hopes to convert those owners to Cessna jets, Donnelly said. The company is expecting low revenue from the T-6 military training plane as the U.S. military winds down it purchases and foreign sales of the plane would be a plus, he said.

Of the aircraft in service, 6,400 are King Airs and 2,250 are Hawker jets, said Julian Mitchell, an analyst with Credit Suisse Group AG, in a note today. The Beechcraft business is in good shape even with the bankruptcy and Textron isn’t expected to invest extra to fix it, Mitchell said.

Original Story from Bloomberg.