ALEXANDER CAMPBELL / LONDON
Fresh financial clout from US parent could allow engine maker to buy into rivals
Aero engine builder MTU is likely to be merged with another European manufacturer under the guidance of new owner, US equity house Kohlberg Kravis &Roberts (KKR). Meanwhile, former owner DaimlerChrysler may follow its sale of MTU with a move to float its 31% share in EADS - but not before 2005.
KKR is believed to have paid €1.5 billion ($1.8 billion) for MTU. The company made $2.2 billion in sales last year, of which 80% came from its involvement in building or maintaining civil engines such as the CFM International CFM56 and the General Electric CF34. The remainder came from military engine sales and maintenance, including the Eurojet EJ200, which powers the Eurofighter Typhoon.
MTU has long advocated consolidation in the European aeroengine industry, at present fragmented between Avio, ITP, MTU, Snecma, Volvo Aero and industry giant Rolls-Royce. Avio was sold by Fiat this year to US equity company Carlyle Group; a controlling share in ITP is now for sale by its owners, Spanish state holding company SEPI and engineering group Sener; and Snecma, 96%-owned by the French government, is due for sale in February.
MTU says the financial backing it will receive from KKR will allow it to buy into some of its newly available rivals. "KKR is very strong financially - at least as strong as DaimlerChrysler," the company says. "We have always said that there should be consolidation, and now MTU will be very happy to play an active role."
The deal still needs clearance from the European Commission and DaimlerChrysler's supervisory board, as well as competition authorities in Canada, where MTU owns 70% of MTU Maintenance Canada (the other 30% is owned by Air Canada).
The sale of MTUis the latest step in DaimlerChrysler's strategy to focus on its car and truck businesses, troubled after a difficult merger between Daimler-Benz and Chrysler in 1998. The company still holds a 31% stake in EADS and refuses to say whether this will be next up on the block. While a sale would improve DaimlerChrysler's financial position - the stake is worth €4.5 billion - the company undertook last year not to sell before 2005 at the earliest.
Meanwhile, the sale of ITP should be largely complete by the end of the year, according to one of the vendors. SEPI owns 50% of Turbo 2000, which in turn owns 53% of ITP. SEPI and Sener, which owns the rest of Turbo 2000, agreed earlier this year to put the company on sale (Flight International, 28 October-3 November).
SEPI has now set a minimum price of €126.5 million for Turbo 2000, valuing the whole of ITP at €239 million. The bidders, including Sener - believed to be the favourite - will submit their bids over the next few days, with final approval by the Spanish cabinet due in the first few weeks of 2004, SEPI says.
Source: Flight International
