BAE puts North American units up for sale: sources

By Soyoung Kim

NEW YORK (BestGrowthStock) – British defense contractor BAE Systems Plc (BAES.L: ) has hired advisors to sell part of its North American commercial aerospace business in an auction that could generate up to $2 billion, sources familiar with the matter told Reuters on Saturday.

BAE Systems, which hired JPMorgan Chase and Wells Fargo as advisors, is seeking the first round of bids for assets from its platform solutions unit by next week, said two sources, who asked not to be identified because the auction has not been made public.

The auction could raise $1.5 billion to $2 billion for BAE Systems, Europe’s largest defense contractor, said one of the sources, who cautioned that the process was at a very early stage.

Private equity firm Carlyle Group (CYL.UL: ), Goodrich Corp (GR.N: ) and Honeywell International Inc (HON.N: ) are among the interested parties for assets from BAE Systems’ platform solutions group, the source said.

BAE declined to comment. Goodrich, Honeywell, Carlyle, JPMorgan and Wells Fargo were not immediately available for comment.

Other possible bidders may include rival aerospace and industrial component manufacturers, such as Rockwell Collins Inc (COL.N: ), Woodward Governor Co (WGOV.O: ) or Moog Inc (MOGa.N: ), and private-equity firms, such as Warburg Pincus and Greenbriar Equity Group LLC, said the Wall Street Journal, which first reported news of the auction on Saturday.

One of the units for sale makes aircraft-engine controls for General Electric Co (GE.N: ), said the Journal, citing people familiar with the matter.

The other units include a commercial avionics business and a division that makes hybrid propulsion systems for buses and trucks, the newspaper said.

Those units are grouped together under “platform solutions,” a business that sells various control systems used in commercial and military aircraft and ground vehicles, the Journal said.

The units collectively have about $200 million in earnings before interest, taxes, depreciation and amortization, or EBITDA, the Journal said.

Initial bids are due for the entire business unit, but BAE may decide to sell the pieces separately, the Journal said.

BAE Systems had $36.2 billion in sales last year, making it the world’s second-largest defense company by revenue.

On Thursday, BAE Systems said it would cut 740 jobs in its military aerospace business in Britain ahead of an expected cut in that government’s defense spending.

The BAE auction would come at a time when large defense contractors are trying to slim down their operations and sell off assets in response to pressures from declining military spending in Europe and the United States.

Northrop Grumman Corp (NOC.N: ) is spinning off or selling its shipbuilding business in an auction that people familiar with the matter have said could generate about $3 billion for Northrop.

Lockheed Martin Corp (LMT.N: ), the top U.S. defense contractor, is expected to fetch about $1.5 billion for the two defense services units it put on the auction block in June, people familiar with the matter have said.

Deal volumes in the aerospace and defense industry have reached $4.2 billion so far this year, up 45 percent from the same period a year earlier, according to Thomson Reuters data.

(Additional reporting by Ben Klayman in Detroit and Rhys Jones in London; Editing by Paul Simao)

BAE puts North American units up for sale: sources