Hawker Beechcraft Buyout Off

As I previously reported Hawker Beechcraft was under offer to be purchased by Superior Aviation Beijing. The deal looked close to a done-deal in the middle of the summer, but it failed to be completed and Hawker Beechcraft is back to looking at emerging from bankruptcy on its own.

So what scuttled the deal? That depends of who you listen to. Different sources have each attributed it to:

• national security concerns as "the company's defense operations were integrated with its civilian businesses that proved difficult to untangle"
• "advisers in the U.S. had trouble negotiating with Chinese representatives unfamiliar with U.S. finance and bankruptcy law."
• CEO of Hawker Beechcraft, Steve Miller, had attributed the failure to "China-bashing by U.S. presidential candidates may have contributed to failure of the talks"
• A press release from Hawker Beechcraft simply said that, "the proposed transaction with Superior could not be completed on terms acceptable to the company."

So what now?

The company has indicated that it plans to emerge from bankruptcy protection as a stand-alone company and will be renamed Beechcraft Corporation. The new entity will focus on the company's most profitable products, which will mean piston aircraft manufacturing and refurbishing older aircraft, including turboprop and diesel upgrades for piston planes. In other words ending jet production.

The latest news this week is that the Beechcraft Premier will be produced as a single engine turboprop design with seating for up to 11 passengers, that looks remarkably like a Pilatus PC-12.

It will be interesting to see what happens over time as the company emerges from bankruptcy protection.

Hawker Beechcraft To Be Purchased By Superior Aviation Beijing

In what has become the repeat of a very familiar story, another financially ailing US aerospace company has been bought out by Chinese interests.

Hawker Beechcraft Corporation (HBC) was a new company put together in 2006 from the old Raytheon Aircraft, purchased for US$3.3B by Onex Partners and GS Capital Partners, part of Goldman Sachs. That was all well and good, but the owners insisted that the company pay for its own purchase, which meant it was carrying US$500,000 a day in interest payments. It was just staying afloat when the 2008 recession hit and bizjet orders dried up. Anyone who thought a company with that kind of debt could survive the recession wasn't paying attention.

The company hired a new CEO, turnaround specialist Steve Miller, who planned to keep it out of bankruptcy, but on 3 May 2012, it filed for Chapter 11 bankruptcy anyway. Despite attempts to restructure the huge debt burden of more than US$2.14B (the last count, as of September 2011), it seems that it was either going to be sold or cease to exist. The final result was that Superior Aviation Beijing of The People's Republic of China made the best offer for US$1.79B. The deal does not include Hawker Beechcraft Defense Co., the subsidiary that builds two military aircraft, the T-6 trainer and the derivative AT-6 light attack aircraft. That exclusion was most likely to avoid any hold-ups in US government approval of the sale.

Superior Aviation Beijing and HBC now have 45 days to put the details together, but it is probably close to a done deal, putting HBC on the same list as a growing number of US aerospace companies that have been recently sold to foreign interests:

• Hawker Beechcraft - Superior Aviation Beijing, China
• Superior Air Parts - Weifang Tianxiang Technology Group, China
• Epic Aircraft - Engineering LLC, Russia
• Diamond Aircraft - majority owned by Medrar Financial Group, Dubai
• Cirrus Aircraft - Government of the Peoples Republic of China
• Continental Engines - Government of the Peoples Republic of China
• Liberty Aerospace - 75% owned by the Kuwait Finance House, a wholly owned subsidiary of Kuwait Finance House of Bahrain
• Piper Aircraft - Government of Brunei

As I have noted before while selling out the whole US aerospace industry to foreigners may not be seen as a good thing, when these companies all needed domestic financial help none was forthcoming. This has meant that each had a choice between the company ceasing to exist or being bought out by middle eastern or far eastern interests.

The bottom line is that if Americans are really worried about this issue then they would put up the money and buy these companies themselves. In the capitalist system the market sorts these things out and if Americans don't want their domestic aerospace industry then apparently other people do.

• AVweb story