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GE close to Avio deal for over 3 billion euros: sources

12/17/2012 | Reuters

MILAN (Reuters) - General Electric Co (GE.N) is close to finalizing an agreement to buy Italian aerospace supplier Avio as early as this week for more than 3 billion euros ($3.95 billion), sources close to the deal said on Monday.

"Barring last-minute surprises, the deal could be closed between Tuesday and Wednesday, with an announcement on Thursday," said one of the sources.

A second source said the price is "more than 3 billion euros" and GE is the preferred bidder.

"Nothing is closed, but there is a desire to get it done before the (Christmas and New Year) holidays," a third source close to the matter said.

Avio, based in Turin in northern Italy, is owned by BCV Investments, in which Cinven private equity has a majority. Cinven bought the company in 2006 in a deal that valued the company at about 2.6 billion euros.

Avio was not immediately available for comment, while Cinven and General Electric declined to comment.

Another source with knowledge of the situation said a Thursday deadline sounded realistic since GE had been conducting due diligence for some time.


But the source added that France's Safran SA (SAF.PA) had not given up on the deal and was trying to get back in the race.

"I am not aware Safran is out of the race," a fifth source said.

Avio, which supplies engine parts for the Eurofighter Typhoon and engine makers GE and Rolls Royce Holdings Plc (RR.L), has previously been in talks with other potential bidders, including Safran.

One of the sources noted GE was not particularly interested in the space assets and could try to sell them at a later stage.

In this case, Safran would be an obvious buyer but, according to Italian bankers involved such a move, would face political opposition.

The government would likely keep a veto right on the space business, the source said.

The Italian government regards Avio as a strategic asset and is thought to be reluctant to let it fall into foreign hands.

Italian defense group Finmeccanica (SIFI.MI), which owns around 14 percent of Avio, reached an agreement last May to sell its stake to state-controlled investment fund Fondo Strategico Italiano.

But that deal was subject to Avio being listed, and earlier this year sources said the plans to go public had been postponed due to adverse market conditions.

State-controlled Finmeccanica has previously said it was looking to sell 1 billion euros of assets as it moves to cut debt and avoid a credit rating downgrade.

Avio is a major supplier of parts for GE aircraft and helicopter engines, demand for which is expected to grow as Airbus (EAD.PA), Boeing Co (BA.N) and other manufacturers whittle down record order backlogs.

In 2011 it had revenues of more than 2 billion euros and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of 384.2 million euros.

(Reporting by Sophie Sassard, Tim Hepher, Alex Smith in London and Massimo Gaia, Stephen Jewkes and Elisa Anzolin in Milan; editing by Matthew Lewis and Gunna Dickson)

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