Carlyle Prepares To Sell Arinc

February 26, 2013

Bookmark and Share

Private equity firm Carlyle is preparing to sell aerospace company Arinc and hired JPMorgan Chase and Evercore Partners to advise on the process, three people familiar with the matter said.

Arinc, which the buyout firm bought from six US airlines in 2007 for an undisclosed sum, is expected to draw interest mostly from larger aerospace industry rivals and may fetch USD$1.2 billion to USD$1.5 billion in a sale, the three people said.

The latest attempt to find a buyer would come more than two years after Carlyle's previous efforts to sell Arinc failed over a price gap, as well as lack of interest by potential buyers in pursuing the entire company.

Carlyle, however, sold Arinc's government consulting services division to Booz Allen Hamilton late last year, getting rid of a business that potential buyers found unattractive in the previous auction, the people said.

Arinc has roughly USD$120 million to USD$125 million in earnings before interest, tax, depreciation and amortisation (EBITDA) and could be sold for more than 10 times EBITDA, the people said.

The auction is expected to be launched later this spring, they added.

The people asked not to be named because the auction is not public. Carlyle did not have immediate comment, while JPMorgan and Evercore declined to comment.

Arinc, founded in 1929, designs systems that help airline pilots communicate with the ground.

Carlyle tried to sell Arinc in 2010 but scrapped the auction after strategic buyers expressed little interest in purchasing the company as a whole, partly due to concerns that Arinc's government consulting services could create conflicts of interest, sources said at that time.

Many defence companies had long offered services that include advising government agencies on programmes they end up bidding for, creating a conflict of interest. That prompted the US Congress to pass a law that requires the Department of Defence to tighten rules on potential conflicts at such companies.

With the sale of that division to Booz Allen last year, Arinc would be a much more attractive takeover target for aerospace and defence companies, the people familiar with the matter said.