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GE (GE) Paying $4.3B For Avio's Aviation Business In Jet Propulsion Push

 December 21, 2012 06:56 AM

(By Balachander) Industrial conglomerate General Electric Co. (NYSE: GE) has agreed to acquire the aviation business of Italy-based Avio S.p.A.  for $4.3 billion in a move to boost its participation in jet propulsion.

Avio, which has supplied components to GE Aviation since 1984, is engaged in the manufacture of aviation propulsion components and systems for civil and military aircraft.

Fairfield, Connecticut-based GE sees "excellent opportunity" in the acquisition of Avio related to margin expansion, the company said.

In addition, GE said it plans to pursue new opportunities for Avio in power-generation, oil, and marine products.

[Related -General Electric Company (GE) Q4 Earnings Preview: Feeling The January Effect]

GE intends to buy Avio's aviation business from Cinven, an European private equity firm that has owned Avio since 2006, and Finmeccanica, the Italian aerospace group.

Avio's 2011 revenue in the aviation sector were $2.4 billion with more than 50 percent of that coming from components for GE and GE joint venture engines.

The purchase price represents a multiple of roughly 8.5x based on 2012 estimated earnings before interest, taxes, depreciation and amortization, GE noted.

GE said it will not be acquiring the space unit of Avio.

GE shares, which have been trading in the 52-week range of $17.15 to $23.18, closed at $21.05 on Thursday.

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