Carlyle considers Avio sale over flotation

Carlyle may opt to sell its stake in Avio, an Italian aerospace engine manufacturer, despite appointing three investment banks to arrange a flotation on the Milan stock exchange earlier this year.

The Carlyle Group, a US private equity investor, is considering a sale of its controlling stake in Italian auto parts maker Avio instead of a planned flotation on the Milan stock exchange.
 
Carlyle appointed investment banks JPMorgan, Lehman Brothers and Mediobanca in April of this year to prepare Avio for a potential listing before the end of 2006. At the time, analysts estimated Avio’s value at approximately €2 billion ($2.5 billion).
 
A source close to the deal confirmed the company was in advance talks with unnamed private equity firms regarding a sale of Carlyle’s stake. A flotation, however, is still a realistic option, the source said.
 
Pier Francesco Guarguaglini, managing director of Finmeccanica, told Italian reporters at an airshow in the UK that the engineering group expected to maintain a share in Avio.
 
In September 2003, Carlyle bought a 70 percent stake and Finmeccanica a 30 percent stake in Avio in a €1.6 billion transaction from Fiat Group, an Italian manufacturer of aircraft and naval engines. Carlyle invested in the transaction from the 2000 vintage $3.9 billion Carlyle Partners III fund and Carlyle Europe Partners II, which raised €1.8 billion in 2005.
 
The deal was funded with approximately €500 million of equity. Debt was provided by Banca Intesa, Citigroup, Goldman Sachs, Lehman Brothers and Mediobanca. Banca Intesa, Calyon and Mediobanca arranged and underwrote a refinancing of the senior debt, also in April of this year.
 
Avio designs, develops and produces components for aeronautical engines, accessory gearboxes, low-pressure turbines, naval and space propulsion systems, as well as providing maintenance, repair and overhaul activities for military and commercial aircraft engines. Avio reported revenues of €1.281 billion in 2005, a 5 percent increase on 2004 figures, and EBITDA of €190.5 million.
 
Avio is the only unrealised Italian investment in Carlyle’s portfolio. The firm sold its 50 percent stake in domestic heating business Riello in October 2004 and disposed of Tecnoforge, a provider of pipe fittings to the oil and gas industries, in December 2004. Carlyle’s Italian operations are headed by Marco Benedetti, the former CEO of Telecom Italia Mobile.