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.
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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).
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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.
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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.
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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.
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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.
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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.
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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.
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.