Cinven in €3.3bn partial exit

The sale of Avio’s aviation business to GE comes as the firm approaches its fundraising target.

Cinven has agreed to a partial exit of an aviation business to General Electric for €3.3 billion, a transaction that could give the firm “momentum” as it works to secure last minute commitments on its way to its €5 billion target for Fund V.

“When you have a big realisation like this at the end of the year, it creates good momentum as you go for the commitments that people are going to put into private equity next year,” according to a source with knowledge of the situation.

Cinven, along with minority stakeholder Finmeccanica, an Italian hi-tech industrial conglomerate, owns a company called BCV Investments, which in turns owns Avio, an aerospace group based in Turin. BCV Investments has agreed to sell Avio’s aviation business to GE for €3.3 billion.

The partial exit will create €1 billion of value for Cinven’s Fund IV, a source close to the matter told Private Equity International. This will bring the fund’s realised proceeds to around €3.4 billion, and close to 60 percent of the capital deployed, the source said.

Frankly we positioned the company very well.

Roberto Italia

BCV acquired Avio in 2006 for €2.56 billion. Under its ownership the group’s revenues and EBITDA have grown by 66 percent and 50 percent respectively. It generated revenues of more than €2 billion and EBITDA of €383 million in 2011.

“It’s an investment we really transformed: we improved the operations, we extended the international reach, we grew earnings and cash flows through investments in technologies, and we added people,” said Roberto Italia, a partner at Cinven. “Frankly we positioned the company very well.”

The transaction comes as Cinven is raising its Fund V, which it launched in September 2011. The firm is close to securing €4.2 billion in commitments, or 80 percent of its €5 billion target, another source said.

Cinven expects to reach a final close for Fund V by March 2013, a source said. The firm held a first close on €3 billion in March 2012.

Cinven and Finmeccanica own respectively around 85 percent and 15 percent of BCV, which will retain full ownership of Avio’s other core business line, its space unit that designs and manufactures components for commercial satellites. Italia said there was a clear potential for further upsides. “The prospects are very bright for Avio in this field. There is growing demand for satellites up there and reliable launchers are few and far between.”

Avio has invested more than €700 million in research and development since 2006, and launched a number of capital expenditure programmes. They include Vega, a small space launcher.

Avio’s space division generated revenues of €297 million in 2011.