Update: Superior Aviation’s bid for Hawker Beechcraft died in Beijing
Superior Aviation’s acquisition of Hawker Beechcraft failed because
of concerns from the Municipal Government of Beijing, the principal financial
backer of the transaction, say people close to the deal in China.
Superior Aviation’s management team was committed to buying Hawker
Beechcraft and paid a $50 million deposit as well as millions in legal and
advisory fees. However, the Municipal Government of Beijing – a 40% shareholder
in Superior Aviation – was unhappy with parts of the original agreement.
Superior Aviation and its bid team – led by accountants Grant
Thornton and law firm Locke Lord – worked closely with Hawker Beechcraft during
the bidding process. The Municipal Government of Beijing became seriously
involved in talks only after Superior Aviation was selected as the preferred
“After the agreement with
Superior, Hawker Beechcraft Corporation sat down with the Beijing Government
which said: ‘This is how we see the deal.’ And it was very different to the
original agreement,” says one China business jet specialist.
One Beijing based consultant who was involved in the transaction
says the Municipal Government was unhappy with the $1.79 billion price. “Quite
frankly the price was outrageous,” he says. “That was not the only problem. It
was very complex and there were lots of issues, but once the Municipal
Government became involved they had some differences of opinion to Superior and
He says the Municipal Government was also concerned about
political opposition to the sale, both in the US – during the run up to
presidential elections – and in China, where the Communist Party is about to
hold a once a decade congress where new political leaders are announced.
Another Beijing based adviser who was involved in the transaction added: “Beijing was not ready to provide financing but the biggest barrier to the deal was concerns about the US/China relationship surrounding Diaoyu Island [islands whose ownership is disputed by Japan and China]. With the new
Chinese Leader coming onboard on November 8 plus the US President Election all happening around this period the Beijing government was simply not in a
position to support Superior’s purchase.”
At the end of August, these problems led to Hawker Beechcraft
asking the court to extend the Chapter 11 negotiation period to the end of 2012,
saying it needed more time to pursue possible emergence from bankruptcy as a
stand-alone company or through a third-party sale.
On Monday, the deal appeared to be in trouble when a meeting
between Superior Aviation and Hawker Beechcraft in China – which was to be
attended by the Mayor of Wichita – was cancelled at short notice. “Superior’s
chairman just disappeared,” says one business jet broker.
On September 18, Hawker Beechcraft announced the talks were off.
“Superior took too long. The deal dragged on and on and
finally Hawker Beechcraft said: ‘You need to move now or we kill the deal,”
says one person close to the manufacturer.
Superior Aviation is 60% owned by Beijing Superior Aviation
Technology Corporation – mainly owned by Cheng Shenzong, the company’s chairman
– and 40% owned by Beijing E-Town International Investment & Development
Corporation, a state-owned investment company.