Reactions Mixed In Wake Of Chinese Deal For Hawker

 - July 11, 2012, 4:40 PM

Reactions have been heavily mixed in the wake of Monday night’s announcement that Superior Aviation of Beijing, China, has agreed to acquire financially troubled Hawker Beechcraft, minus its Hawker Beechcraft Defense Company (HBDC) division, for $1.79 billion. The majority of business aviation analysts contacted by AIN believe the Chinese firm is overpaying for the Wichita, Kansas-based aircraft manufacturer, which is in Chapter 11 bankruptcy protection.

But Kansas governor Sam Brownback–speaking here at Farnborough to AINtv–stressed it’s not yet a done deal and vowed to retain Hawker Beechcraft jobs in his state.

Under the terms of the “strategic combination,” Superior Aviation will make payments over the next six weeks of the “exclusivity period” to support ongoing jet-related operations as a means of sustaining the jet business until the transaction closes. With HBDC becoming a separate entity, it would continue to manufacture the T-6 trainer and pursue certification of its derivative, the AT-6 light attack aircraft. In the event that HBDC is subsequently sold to a buyer acceptable to the U.S. government, up to $400 million of the $1.79 billion purchase price would be refundable to Superior under the terms of the acquisition.

This price is what caught the immediate attention of aviation analysts. “If this was the ‘most attractive offer,’ I’d hate to see what the others looked like,” Teal Group vice president of aerospace analysis Richard Aboulafia told AIN. “I have no idea why Hawker Beechcraft would be worth $1.8 billion without its defense side. Given the money needed to reorganize, that’s a very high price.”

Zenith Jet vice president George Tspoeis expressed similar sentiments. “The price is too high, especially without the T/AT-6 line,” he said. “I believe that the Chinese will whittle the price down immensely to the point where the deal won’t make any sense to Hawker Beechcraft. Also, 45 days to complete the deal is not a lot of time. If HBC accepts the offer, it will be at a significantly lower price than $1.79 billion.” But, he added, “Let me be the first on record to say that this deal won’t go through.”

Business aviation analyst Brian Foley, president of consulting firm Brian Foley Associates, accentuated the positives of the deal, saying, “This is a very good deal for Hawker and its creditors.” Though he said Superior is offering a “very high premium” and providing working capital even before the deal is finalized, “it still has 45 days to walk after [due] diligence.” Foley also noted, “Back in the day, the industry felt General Dynamics overpaid for Gulfstream, which was not the case. Perhaps the long-term strategic vision of Superior is equally compelling.”

Meanwhile, Governor Brownback brought a dose of reality about the Hawker agreement. “This is not yet a sale,” he told AIN at the Kansas pavilion here at the show. “This is a stalking- horse bid. It’s a significant step, but there are several other big steps to follow.”

Brownback, however, is most concerned about keeping Hawker Beechcraft jobs in Kansas. While Superior said it intends to maintain the Wichita-based OEM’s existing operations, he is beating the drum to make sure that the Chinese company, should it actually purchase Hawker, follows through on this promise. One thing working in his favor, he said, is that Hawker Beechcraft has “enormous” physical plants in Kansas, “and you just can’t move that.”