Carlyle keen on Fiat Avio

The US private equity firm has been linked to a possible E1.5bn buyout of Fiat’s aeronautics unit.

Reports on Thursday suggest that US buyout firm The Carlyle Group, in tandem with another financial investor, have expressed interested in acquiring Fiat Avio, the aeronautics division of Italian carmaker Fiat.

Any offer for Fiat Avio is likely to value the business around the E1.5bn mark, the Financial Times said.

Established in 1908, Fiat Avio engages in the construction of engines for military and commercial aircrafts and has several Italian military contracts.

Fiat had previously been reluctant to sell Fiat Avio because of its strong cash flow and steady profitability, but worsening results at Fiat Auto has forced the company to put the unit up for sale.

A deal with the Carlyle consortium is likely to face a number of obstacles, however. The Financial Times cited banking sources suggesting that the Italian government would be against a private equity deal for the business, favouring a trade purchase it believes will offer a longer term strategy for Fiat Avio. Fiat is currently reported to be in advanced talks with French aerospace manufacturer Snecma on a deal.

If successful, a deal with Carlyle would be the latest in a series of Fiat disposals involving private equity houses in the past six months. In August, the Italian group agreed to sell half of its Teksid components manufacturing unit to an international group of private equity firms, including Questor Management, the private equity operations of JP Morgan Chase, AIG and Private Equity Partners.

In January 2003, a consortium of French financial investors including Eurazeo, Pragma-Capital, and UI, entered into exclusive talks to acquire truck rental company Fraikin from Iveco, a unit of Fiat.