Cinven, the European private equity firm, today announces that its investment subsidiary BCV Investments S.C.A. (“BCV”) has entered into an agreement with GE and its portfolio company Avio S.p.A. (“Avio or “the Group”) to sell the aviation business of Avio, which designs, manufactures and services components for commercial and military jet engines, to GE for a total consideration of €3.3 billion. Avio will retain full control of its space unit and will remain owned by BCV. Cinven and Finmeccanica own BCV.
Headquartered in Turin, Italy, Avio is a global business which operates in four continents and employs about 5,300 people. In 2011, the Group generated revenues of over €2 billion (up 15.6% on the prior year) and EBITDA of €383 million (up 13.3%) with investment in R&D and capital expenditure of approximately €170 million.
Cinven’s BCV acquired Avio in December 2006 for an enterprise value of €2.57 billion. Avio has demonstrated consistently strong financial performance with revenues increasing by 66% and EBITDA by over 50% under BCV’s ownership. This was achieved by Avio’s management team, along with the expertise and support of Cinven, through:
- positioning Avio to take advantage of the long-term structural growth in aviation, winning positions on some of the most promising new aerospace programmes;
- investing significantly in management expertise including the appointment of a highlyexperienced CEO, Francesco Caio in 2011, formerly Chief Executive of companies such as Indesit, Cable & Wireless Communication and Omnitel Vodafone;
- achieving major operational improvements through the implementation of best manufacturing practices; transitioning the company to a highly successful stand-alone business, with excellent manufacturing performance levels;
- focusing on the Group’s commercial relationships to reinforce its major OEM partnerships;
- investing more than €700 million in R&D and a large number of capital expenditure programmes since 2006, including Vega, the highly successful small space launcher, and the introduction of Ti-Al component manufacturing processes;
- pursuing successful international expansion. By working closely with the Cinven Portfolio team in Asia, Cinven helped set up two joint ventures with Xian Aero Engines and Avic Harbin Dong’an Engine – both state-controlled aerospace businesses in China. Cinven also helped Avio make very successful acquisitions in Brazil, the Netherlands and Poland.
Commenting on this transaction, Roberto Italia, a Partner at Cinven, said:
“Avio’s strong performance, and the returns generated for our Fund, underlines how Cinven can successfully grow European-based businesses even during periods of economic and political uncertainty. Our investment in BCV and Avio demonstrates clearly significant improvements to the Group’s operations, manufacturing processes and competitive positioning, working closely with the management team and through substantial investment in technologies and people. We increased the workforce, extended the Group’s global reach through acquisitions and organic growth. In particular, our Asia portfolio team was instrumental in setting up two JVs in China to help internationalise both Avio’s revenues and cost base.
We were highly attracted to Avio given its growth qualities derived from the non-cyclical defence and space divisions. We enjoy a very constructive relationship with our partner, Finmeccanica, and the Italian institutions which have always been vigilant towards and proud of Avio’s success.
GE has already demonstrated its significant commitment to and investment in Italy. It has enjoyed a very successful commercial relationship with Avio since 1984. We are confident that, under GE’s ownership, the aviation business of Avio will continue to thrive.”
David Joyce, President and CEO of GE Aviation, added:
“We look forward to Avio joining the GE family. We have worked closely with Avio for decades, and we anticipate a bright future together. This acquisition is a great fit with our existing portfolio. Avio has technologies, capabilities and outstanding engineers to help grow our business. GE is an excellent corporate citizen in Italy, and we are very excited to grow the relationship.”
Cinven’s BCV retains majority ownership of Avio’s space unit which designs and manufactures components for commercial satellites, for civil and military use, including Vega and Ariane 5. In 2011, the division generated revenues of €297 million. Following the successful Vega maiden flight on 13 February 2012, Avio’s space unit reinforced its strong positioning in a market that will continue to grow driven primarily by satellites for the Earth’s observation.
Following the completion of the sale of Avio’s aviation business, this transaction will generate around €1 billion of value for the Fourth Cinven Fund. This joins the successful realisations of Phadia (3.4x) and Ziggo (2.8x).
The completion of the Avio aviation transaction is subject to customary regulatory clearances.