Analysts surprised at £1 billion paid by Finmeccanica for 50% of helicopter manufacturer
GKN will receive over £1 billion ($1.79 billion) from Finmeccanica for its stake in AgustaWestland, in a deal that furthers the Italian group's policy of concentrating on aerospace and defence markets. Finmeccanica was previously a state-owned holding company for an assortment of engineering businesses, but chairman Pierfrancesco Guarguaglini is intent on following through his "Finmeccanica II" strategy to focus the group around its aerospace and defence divisions, cutting loose non-core operations like the Ansaldo transport and energy businesses.
GKN has ruled out spending the money on buying Boeing's US midwest aerostructures plants. GKN chief executive Kevin Smith denies he plans to take over the Kansas and Oklahoma factories, saying that the company might instead choose to buy back its own shares to counteract the effect on earnings of the AgustaWestland sale. More acquisitions for the company's automotive and aerostructures units are also planned, and part of the £1.06 billion price will be used to repay some or all of GKN's £793 million debt.Aerospace Services strategy director Graham Chisnall said last year that GKN planned to triple its aerostructures business in the next six years "through acquisition and programme capture" (Flight International, 15-21 April 2003).
Although Smith warned that GKN's earnings would fall in the short term, the news of the purchase price, higher than predicted, sent GKN's shares rising. Analysts had expected the 50% share to go for only £800 million (Flight International, 25-31 May). The sale should close by the end of the year, GKN says. Finmeccanica says it will fund the acquisition by selling half its shares in semiconductor manufacturer STMicro-electronics, raising $1.11-$1.12 billion at current prices, and may also call on long-term debt agreements.
AgustaWestland needs to win the UK armed forces' Future Lynx contract to upgrade 100 Lynx utility/maritime helicopters - Finmeccanica will pay £35 million less if the contract is not signed by the end of 2005.
AgustaWestland is Europe's second-largest helicopter manufacturer, with sales of €2.59 billion ($3.12 billion) in 2003 against Eurocopter's €2.61 billion. Of its revenue, 80% came from military sales, including seven EH101 transports and 25 Westland AH1 Apaches - the latter built under licence from Boeing.
ALEXANDER CAMPBELL / LONDON
Source: Flight International
