Diversified conglomerate General Electric Co. (GE: Quote) Friday said it has agreed to buy the aviation business of Avio S.p.A., an Italian manufacturer of aviation propulsion components and systems, for $4.3 billion or about 3.3 billion euros. GE also said it plans to pursue new opportunities for Avio in power-generation, oil, and marine products, while it will not purchase Avio’s space unit.
GE plans to acquire the business from British private equity firm Cinven that has owned Avio since 2006, and Finmeccanica SpA (FINMY.PK), the Italian aerospace group. The deal is subject to regulatory and governmental approvals. Avio is 81 percent owned by Cinven and 14 percent by Finmeccanica. Cinven was reportedly trying to take Avio public this year, but weakness in the European markets caused the company to abandon that plan. GE is said to be planning to ramp-up its manufacturing in order to meet record orders for new engines over the next five years, and the acquisition is expected to strengthen the global supply chain of GE’s Aviation unit. The deal would bolster its commercial jet business.
Also, GE expects that the acquisition of the business, which provides components for GE Aviation and other engine companies, would further GE’s participation in jet propulsion.
Founded in 1908, Turin, Italy-based Avio makes components for commercial and military jet engines as well as propulsion systems for satellite launch vehicles.
Avio, which has worked with GE since the 1960s, makes components for the large GE90 and GEnx turbofan engines for the commercial aircraft sector, as well as for helicopters and other products. According to GE, these GE engines are among the best-selling in aviation and are expected to provide a profitable, long-term revenue stream for the company. Avio is also currently working on an engine for Boeing Co.’s (BA) 787 Dreamliner as well as Boeing 777.
In 2011, Avio generated revenues of $2.4 billion, of which 90 percent were generated outside Italy. More than 50 percent of that revenue derived from components for GE and GE joint venture engines. Avio employs over 5,200 staff, about 4,300 of whom are based in Italy.
Commenting on the deal, Francesco Caio, CEO of Avio, said, “It lays the foundations for the next phase of development for our company and will enable our teams and plants to become centers of excellence in transmissions and turbines for one of the leading companies in this field.”
Regarding Avio’s space division, Caio said the unit enters a new phase as it will not see a change of ownership in the short term. Cinven and Finmeccanica will work together to establish the most appropriate set of industrial alliances to ensure long-term competitiveness and compliance with national and European interests, he added.
In pre-market activity, GE shares are currently trading at $20.83, down $0.22 or 1.05 percent.
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by RTT Staff Writer
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