Doughty Hanson, the private equity firm active across Europe and the US, is reported to have reached agreement with Italian executive aircraft manufacturer Piaggio Aero Industries to launch a bid for Fiat Avio.
Fiat Avio, which manufactures engines for military and commercial aircraft and has several Italian military contracts, was put up for sale by the Italian conglomerate last year as part of attempts to restructure its operations to reduce debt. Doughty Hanson and Piaggio Aero Industries are reportedly willing to offer E1.8bn for the unit, according to Italian newspaper Il Sole 24 Ore.
Such an offer from Doughty Hanson would see it exceed the E1.6bn bid reportedly on offer from rival private equity house Carlyle Group. The US buyout firm was in the driving seat last week after it emerged that it had joined forces with state-owned defence and engineering firm Finmeccanica in its offer. French aviation group Snecma also announced that it had withdrawn from the bidding last week. The Italian government is thought to favour a deal involving an Italian trade buyer.
The sale of Avio looks set to be the latest in a series of Fiat disposals involving private equity houses. Last 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 (a subsidiary of Credit Agricole), entered into exclusive talks to acquire truck rental company Fraikin from Iveco, the truck division of Fiat.