July 16, 2012
William Garvey and Kerry Lynch Washington
Hawker Beechcraft's announcement of its potential sale to a small Chinese company for $1.79 billion could mark the beginning of the end of a decades-long period of missed opportunities and missteps at what had been among general aviation's most solid manufacturers.
Many in Hawker Beechcraft's Wichita headquarters regard the buyout as the best option, but others elsewhere are skeptical about the offer's substance and the future of the company.
Specifically, Hawker Beechcraft, which filed for Chapter 11 bankruptcy protection May 3, announced July 9 that it had entered an “exclusivity agreement” with Superior Aviation Beijing Co. Ltd., lasting 45 days, during which the two will attempt to finalize details of the takeover. If that occurs, Superior would serve as a stalking horse in an open bidding process. During the exclusivity period, Superior is to provide Hawker Beechcraft with up to $50 million to continue business-jet production.
Superior has said it would keep Hawker Beechcraft's existing operations in the U.S. and retain its employees and executives. No mention was made of also establishing manufacturing operations in China, though that seems a likely eventuality, considering the prestige the Chinese attach to aircraft-building and the country's vast market potential for such products.
Notably, the transaction would not include Hawker Beechcraft Defense Co. (HBDC), which makes the T-6A/B military trainer and is developing a tactical version, the AT-6. However, if HBDC is sold separately, up to $400 million from its divestiture would go to Superior.
Should Hawker Beechcraft fail to be acquired, it plans to emerge from bankruptcy as a standalone entity whose ownership would transfer from Goldman Sachs and Canada's Onex Corp., which acquired it from Raytheon in 2007, and to its creditors. That would erase $2.5 billion of debt.
While the news stirred hope among fretful Hawker Beechcraft employees, their reaction was hardly universal. “What an exceedingly odd announcement,” comments Richard Aboulafia, vice president-Analysis, at the Teal Group. “If AVIC/Caiga [established Chinese aircraft manufacturers] were behind this, that would be one thing. But we're talking about a much smaller and less well-connected entity.”