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GE to buy Avio’s aviation business for $4.3 billion
December 22, 2012
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FAIRFIELD: Industrial conglomerate General Electric plans to buy the aviation business of Italian manufacturer Avio for $4.3 billion to grow its jet propulsion business and strengthen its supply chain.

The Fairfield, Conn., company said on Friday that it wants to build its supply chain as it ramps up engine production. The deal also gives GE a chance to offer Avio products outside the aviation industry, in power generation, oil and marine products.

GE will buy Avio SpA’s aviation business from European private equity firm Cinven and the Italian aerospace group Finmeccanica.

Avio has supplied GE Aviation since 1984. The company, which is based in Turin, Italy, employs about 5,300 people. It makes aviation propulsion components and systems for civilian and military aircraft, including low-pressure turbine systems, accessory gearboxes, geared systems and combustors. Last year, its aviation business generated $2.4 billion in revenue, more than half of which was derived from components for GE and GE joint venture engines.

GE isn’t buying Avio’s space unit, which employs 800 people.

Avio’s aviation business had sales of 1.7 billion euros ($2.2 billion) last year, versus 297 million euros at the space division, the prime contractor on the European Vega launcher, for which Cinven and minority investor Finmeccanica said they plan to seek industrial alliances.

Fairfield, Connecticut-based GE beat offers for Avio from Safran SA (SAF), CVC Capital Partners Ltd. and Clessidra SGR SpA, people with knowledge of the negotiations have said. The deal is subject to regulatory and governmental approvals.

“This acquisition is a great strategic fit with our existing portfolio,” David Joyce, head of the GE Aviation division, said in the statement.

Avio gets more than 50 per cent of sales from GE and GE joint-venture engines. It makes parts for the US company’s newest model, the GEnx, which powers Boeing’s 787 Dreamliner and 747-8 jumbo jet, and is a supplier to CFM International SA, a venture of GE and Safran that’s the exclusive source of engines for the Boeing 737, the world’s most widely flown passenger jet.

GE said the acquisition will also create opportunities to offer Avio products and services beyond the aviation industry, with prospects for expansion in power generation, oil, and marine products.

Avio employs about 5,300 people, 4,500 of them in Italy, including 800 at the space unit.

 “The space business is going to have to go somewhere,” said Thomas Picherit, a Paris-based analyst at Alphavalue SAS. “They may have to sell at some kind of a discount.”

Founded as the aeronautics unit of Italian carmaker Fiat SpA in 1908, Avio was purchased by Carlyle Group LP and Finmeccanica in 2003 before being sold to Cinven in 2006 in a deal that valued it at about 2.6 billion euros.


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