What next for Hawker Beechcraft?
The big question for the new owners is whether to keep the company whole or split it up. Hawker Beechcraft has had many enquiries from possible buyers and there is an argument that it is worth more if the company is split up.
Chapter 11 is good news for Hawker Beechcraft and an opportunity for the company to emerge much stronger. The big question for the new owners – Centerbridge Partners, Angelo Gordon & Company, and Capital Research & Management, and other debtholders – is whether to keep the company whole or split it up? Hawker Beechcraft has had many enquiries from possible buyers and there is an argument that it is worth more if the company is split up.
Hawker Beechcraft can be viewed as three divisions – Hawker, Beechcraft and customer services – or as four parts – Hawker, Beechcraft, Military and customer services. All are attractive to certain buyers.
Hawker is the only loss making part of the business. However, it is still an attractive one to buyers that want to break into aerospace. The brand is strong and there is a lot of know-how in the business – the Hawker 4000, for example, was the first 100 per cent composite business jet.
One of the big problems with Hawker is that the company, expecting large Hawker 4000 deliveries, guaranteed contracts with major suppliers. Chapter 11 allows it to re-negotiate these.
Beechcraft has a fantastic reputation and a very loyal customer base. Competitors may criticise the age of the products but customers still love them. “We could keep the piston division profitable just selling to Brazil,” says one Hawker employee.
With thousands of aircraft still flying, the customer services division is an extremely attractive one for a potential buyer. The growth in customer service has been impressive. In 2008, at the top of the business jet market, the group, which is headed by Christi Tannahill, senior vice president, global customer support, had sales of $522 million. In 2011 they rose by $17.6 million to $562.2 million.
Who will buy Hawker Beechcraft?
It is easy to assume that the company, or parts of it, will be bought by a Chinese entity but we would bet more on a US buyer or one from another part of Asia. Chinese buyers are looking for big discounts. Some analysts have said that Cessna’s deal with AVIC would rule out a similar deal with Hawker Beechcraft, we disagree, AVIC has many competing divisions and one could easily be a bidder.
We would also not rule out private equity investors. “I would love TPG or someone to buy Hawker and make a big success of it just to rub Goldman’s nose in it,” says one banker.
This is clearly an uncertain time for staff, customers and financier of Hawker Beechcraft but it should just be a blip in the company’s great history and new shareholders offer real opportunities.