Dubai firm begins process to acquire Landmark

 - April 30, 2007, 6:20 AM

State-owned Dubai Aerospace Enterprise (DAE) agreed last month to purchase Carlyle Group’s Landmark Aviation and Standard Aero Holdings for $1.8 billion. If the deal makes it through the lengthy approval process as proposed, it will be DAE’s first venture into the U.S. market.

An April 2 Securities and Exchange Commission filing by DAE was the first public acknowledgement of the deal. The filing is the initial step in what promises to be a months-long process of financial and legal scrutiny.

In the filing, DAE said it planned to pay Carlyle Group $1.034 billion for Standard Aero, which it acquired in 2004. The balance is slated for Landmark, formed by Carlyle in 2005 when it consolidated Garrett, Piedmont Hawthorne and Associated Air Center under one name. DAE also confirmed that it is interested primarily in the maintenance business and plans to sell all of Landmark’s 33 FBOs to a yet-to-be-determined buyer or buyers.

Aside from the standard financial issues of a major corporate buyout, this deal also faces the scrutiny of the Council on Foreign Investment in the United States (CFIUS), an inter-agency committee chaired by the Secretary of the Treasury. The committee was originally chartered by an executive order to examine foreign investment that has national security implications.

A source close to the deal told AIN that although filing a request with CFIUS isn’t mandatory, most companies involved with direct foreign investment do so to appear fully transparent. He added that Carlyle and DAE share this philosophy, which is why they will file with CFIUS and make themselves, and their structure and intentions, well known on Capitol Hill.

CFIUS will take up to 45 days to review the application, at which point a final decision may be deferred to the President. A Carlyle official told AIN that this is rare, having happened only twice in the last two years. Though the content of DAE’s SEC filing supported the company representative’s statement that a voluntary application would be filed with CFIUS shortly, Carlyle declined to comment further on exactly when that would happen.

DAE has said previously it feels transparency is important because of the public’s and lawmakers’ outcries about last year’s Dubai Ports World scandal. In that case, another Dubai-owned company attempted to purchase six U.S. shipping ports before Congress pressured it to abandon the deal. The DAE deal shouldn’t be as hotly contested because security isn’t so much of a public concern with the aviation MRO business. In fact, a Carlyle representative said the company might agree to an “evergreen” clause in which the company can be open to review at any time in the future, even after the deal closes.

A potential barrier, however, is lawmakers’ relative lack of information about DAE. The company, formed in February last year and run by former Honeywell Aerospace president and CEO Robert Johnson, claims to have an initial investment of $15 billion.

Though the name of the company under the potential new owners has not been decided, DAE did not change the name of SR Technics, an indication that aircraft operators might continue to deal with Landmark Aviation and Standard Aero, respectively. Whatever the name, this potential change for Landmark’s constituent parts marks the latest in a series of acquisitions, sales and buyouts that dates back to the early 1930s (see timeline above).