Private equity firm Carlyle Group is looking to sell part of its aerospace portfolio company Arinc, more than a year after efforts to sell the company as a whole failed, according to people familiar with the matter.
The potential sale of Arinc's government consulting services business could pave the way for an eventual sale or initial public offering of the rest of the company, which is much larger and seen as more attractive than the services unit, the sources said.
The Annapolis, Maryland-based company consults with the military and designs systems that help airline pilots communicate with the ground. Arinc also provides technical analysis and engineering services to the US DoD and US armed forces.
The unit is expected to have about USD$30 million of earnings before interest, tax, depreciation and amortization (EBITDA), roughly a fifth of the entire company's EBITDA, two of the sources said. It may fetch 6-7 times EBITDA in a sale, they said.
Representatives of Carlyle and UBS declined to comment.
Carlyle, which bought Arinc for an undisclosed sum in October 2007 from six US airlines, tried to sell the company in 2010 but scrapped the auction after strategic buyers expressed little interest in purchasing the company as a whole, people familiar with the matter told reporters then.
The potentially interested parties at that time did not pursue the entire company partly due to concerns that Arinc's government consulting services could create organizational conflicts of interest, the sources said previously.
Many defense companies have long offered services that include advising government agencies on programs they end up bidding for, creating a conflict of interest. That prompted the US Congress to pass a law last year that requires the Department of Defense to tighten rules on potential conflicts at such companies.
Selling the services business now could make it easier to sell the rest of Arinc later, sources told reporters this week.