Jet Aviation confirms it’s on the block

 - April 9, 2008, 6:23 AM

The direct reports from Jet Aviation concerning its “for sale” status do not reveal much in the way of hard news. At least not yet. A spokesman confirmed the company has engaged New York investment house Goldman Sachs to handle the possible sale of the, family-owned company. Some 40 copies of “the book” (pertinent proprietary financial information about the company) have been distributed to interested parties who signed non-disclosure agreements.

“We have not been in direct talks with anyone yet,” the spokesman said at press time, “but things have started to roll. I expect talks could begin soon. I’ll know more in August.” Asked if the company may be sold piecemeal, he said, “No. The strategic options would have to include everything, the whole company.”

Certainly, the prospect of securing a strategic partner is a distinct possibility. Should the company not draw the level of bidding anticipated by its owners, the offer of sale could also be withdrawn. One industry observer said, “They don’t have to sell. This isn’t a foreclosure. It’s up to the Hirschmann family to decide if any offers are consistent with what they believe is the value of the company.”

Jet Aviation was founded in 1967 by the late aviation enthusiast Carl Hirschmann in his native Switzerland. Hirschmann established maintenance and airline handling services in Basel, Zurich and Geneva. The Dusseldorf, Germany, maintenance base opened in 1975, and four years later Hirschmann penetrated the Middle East market, establishing a partnership with a group of high-level Saudi Arabian executives. Later, Jet Aviation established a string of four FBOs in the U.S., setting up its global company headquarters in West Palm Beach, Fla. Its other bases are at Bedford, Mass., outside Boston, Dallas Love Field and Teterboro, N.J.

Jet Aviation’s European operations number 10 in total, with the emphasis on maintenance and aircraft sales and management services. Its charter fleet is one of the world’s largest, with more than 150 business jets directly available. The company, which remains closely held by the Hirschmann family and is led by Carl’s son, Thomas, also has maintenance bases in Singapore and Hong Kong.

The trickle of information coming from Jet Aviation’s West Palm Beach headquarters contrasts mightily with the flood of speculation about what may be going on with the company. Suitors mentioned include Gulfstream (parent General Dynamics), NetJets (parent Berkshire Hathaway), Signature/BBA Aviation, TAG Aviation and Carlisle Group (parent of Piedmont Hawthorne). Other theoretical buyers include banking and investment houses that would be able to subdivide Jet Aviation’s wide range of services.

Jet Aviation, with heavy concentrations in aircraft charter and management, maintenance, interior completions and FBOs, is among the most diverse of aviation companies. That would make it financially difficult for an existing aviation-specific strategic buyer to devour the entire pie chart in one sitting. Another possibility would be that two or more strategic buyers could combine to buy the company, and then divide the pieces that each one wanted.

David Hurley, CEO of PrivatAir, said he is one of those who has looked over Jet Aviation’s prospectus from Goldman Sachs and is definitely interested. He told AIN, “We may join forces or we may look at it alone. There are some highly symbiotic relationships that could go together well, with the BBJ completions capability and some of Jet Aviation’s portal locations. It has been my dream to operate portal-to-portal service between Europe and North America. We’re doing that now with Lufthansa. [The German flag carrier wet leases a PrivatAir BBJ for first-class-only regular service between Dusseldorf, Germany, and Newark.]” Hurley said most buyers would likely spin off the FBO segment.

Among the three most popular potential buyers whose names are being touted, Berkshire Hathaway/ NetJets is thought to have the most to gain. Outsourced maintenance and interior refurbishing for NetJets’ huge fleet is a major line item on the company budget. Bringing that capability in house has the potential to bring about significant savings.

Also, Jet Aviation’s strong presence in Europe could boost NetJets’ European program, which has been slow to take hold. Future geographical targets of opportunity for the giant among frax providers include the Middle East, where Jet Aviation is strong with bases in Jeddah and Riyadh, Saudi Arabia.

And Berkshire Hathaway’s pockets are deep. Observers note that acquiring Jet Aviation would fit into Warren Buffett’s philosophy of giving NetJets the tools it needs to stay on top. Richard Santulli once said Buffett asked him who his competition was in Europe. When he replied there was no real competition, Buffett countered, “Good. What do you need to keep it that way?”

Gulfstream may also be interested in the completions and maintenance capability of Jet Aviation. A natural alliance would put the Savannah, Ga. airframer in league with NetJets to make the most of Jet Aviation. The two companies are already wed in the Gulfstream Shares fractional program, which teams the two companies’ sales and support services. It was a first for NetJets, which later formed a similar strategic alliance with Boeing Business Jets for its BBJ fractional program.

While the list of possible alliances among strategic buyers is long, some say the more likely scenario is that of a finance house taking the reins and eventually selling off the various divisions in the manner that makes the most financial sense. That would enable segments to be sold at the most propitious time.

This brings up the question of whether or not ow is the best time for the Hirschmann family to be making this move. Most agree that it isn’t, but it could be a lot worse. Despite the turmoil last year, Jet Aviation had its second-best year ever. At SwFr55 million ($35.3 million), profits were down only 6 percent from 2000, the best year in the company’s 35-year history. Total revenues last year were SwFr795 million ($510.8 million), compared with SwFr841 million ($540.3 million) the previous year.

As to the why of the current plans to float the company, people close to the family said, “They’re not getting any younger, and some believe it’s time to cash in."