KKR wins exclusivity for MTU

Kohlberg Kravis Roberts (KKR) is reported to have won exclusivity in its negotiations to buy MTU, the aero engines business of DaimlerChrysler.

The sale of aero engines firm MTU to US private equity firm KKR has moved a step closer, according to banking sources quoted by Reuters.

The news follows speculation that private equity firms would be thwarted in their attempts to buy the business, due to the German Government’s reservations about a defence asset being sold to a foreign buyer. Chancellor Gerhard Schroder was quoted as saying: “Germany has an interest in keeping our capacities in defence technology – highly specialised in many areas – in Germany rather than having others control it.”

Germany’s Economy and Labour Minister Wolfgang Clement revealed Government plans to pass legislation giving it the right to review foreign investors’ purchases of German defence and armament sector firms.   

Despite this, KKR is tipped to succeed with an offer of around E1.5bn backed by bank financing from Commerzbank, CSFB and JP Morgan. KKR’s main competition was thought to have been Doughty Hanson, though there was also interest from Carlyle Group and Blackstone Group.

MTU is outside DaimlerChrysler’s core car and truck operations. Based in Munich, it reported sales of E2.2bn in 2002 and employs more than 8,000 staff. Germany's leading engine manufacturer, it develops, manufactures and provides service support for aircraft engines, both military and civil. Its customers are manufacturers and operators of engines and industrial gas turbines around the world.