December 27, 2013
By Alton K. Marsh
Stock analysts generally praised a plan by Textron CEO Scott C. Donnelly to purchase Beechcraft for $1.4 billion during the first half of 2014 during a conference call Dec. 27. Some expressed reservations about future sales of the T-6 military trainer. All seemed to be in agreement that the plumb of the purchase is the Hawker Beechcraft Parts and Distribution portion of the deal that includes more than 90 service centers.
Textron must raise $1.1 billion in new debt to finance the deal. A chart provided by Textron shows that business and general aviation, including the King Air, Baron, and Bonanza, amounted to 54 percent of 2013 revenues while customer support, including service centers, amounted to 31 percent. The Beechcraft Defense Company portion that builds the T-6 tandem two-seat turboprop trainer amounts to 16 percent. Beechcraft has offered it as a light attack aircraft in the face of strong competition from Embraer that has a similar model in production.
The purchase is not necessarily a done deal. Beechcraft officials said they would give Textron a $48 million termination fee if a better offer comes along, but on Dec. 27 none who were interviewed knew of interest by possible challengers. Textron said Beechcraft has estimated revenues in 2013 of $1.8 billion. The deal will conclude sometime in the first half of 2014.
With the purchase comes type certificates for the Hawker 4000 and Premier 1A. There is no plan to put those jets back into production, although service and parts for them is a lucrative portion of the purchase. Donnelly mentioned there are no jet production "overlaps" with Cessna Aircraft jets since "... Beech previously discontinued its jet manufacturing business." The deal brings 35,000 customers into the Textron family that includes Lycoming and Bell Helicopter. Donnelly said there will be product upgrades in addition to support for Hawker jets in the fleet.
Beechcraft has a program executed by Sierra Industries in Texas to upgrade the Hawker 400A/XP into the Hawker 400XPR with new engines, avionics, and winglets. The program is substantially behind that of competitor Nextant that offers the 400XTi with essentially the same upgrades. Nextant was first to market and has already captured a significant portion of the aging Hawker 400 fleet. The upgrades are to be provided by Beechcraft service centers.
Analysts have predicted the Textron and Beechcraft deal is the first of many mergers to be announced in the aerospace industry in coming weeks.
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