Dec. 7 (Bloomberg) -- Onex Corp., Canada's biggest buyout firm, and Goldman Sachs Group Inc. are negotiating to buy Raytheon Co.'s aircraft unit for as much as $3 billion, three people with knowledge of the talks said.

Raytheon began the discussions after reviewing competing bids for the Wichita, Kansas-based unit from buyout firms Carlyle Group and Cerberus Capital Management LP, said the people, who asked not to be identified because the talks are private. Toronto-based Onex last year bought aircraft-parts plants in Wichita and Oklahoma from Boeing Co.

Business-aircraft manufacturers such as Raytheon and Textron Inc. may deliver a record 1,000 planes next year because of increased demand from Asia, Africa and the Middle East, according to avionics supplier Honeywell International Inc. in Morris Township, New Jersey. Textron, based in Providence, Rhode Island, makes Cessna planes.

Demand ``continues to be strong as a business jet is seen as a productivity tool compared to all the time wasted flying commercial airlines with their extensive security checks and frequent flight delays,'' said Mary Anne Sudol, an analyst at Caris & Co. in New York. Sudol rates Raytheon's shares ``average'' and a family member owns the stock.

Raytheon, based in Waltham, Massachusetts, said in July it may sell the aircraft division, which makes Beechcraft and Hawker corporate jets and the T-6 trainer plane for the U.S. military. The company, the world's largest missile maker, said the unit's profit margins were the smallest of all its businesses.

Government Approvals

Raytheon spokesman Jon Kasle said the company ``won't comment on market rumors and speculation.'' Onex managing director Nigel Wright declined to comment, as did Richard Friedman, head of principal investing at New York-based Goldman. The Wichita Eagle newspaper reported the talks earlier today.

A purchase by a non-U.S. company such as Onex would require approval by the departments of Defense, State and Treasury, the people said. The unit's contract to supply trainer aircraft and training systems to the U.S. Air Force, Navy and Marine Corps lasts until 2017, they said. U.S. Treasury Secretary Henry Paulson is a former Goldman Sachs chairman.

Onex, founded by Canadian billionaire Gerald Schwartz, controls Spirit AeroSystems Holdings Inc., a maker of airplane wings and bodies that sold stock in a $1.4 billion initial public offering in New York last month. Onex formed Spirit when it bought Boeing's structural-components business in June 2005 for about $1.2 billion.

Onex Eyes Qantas

Onex is part of a private-equity group led by Macquarie Bank Ltd. and Texas Pacific Group that's bidding for Australia's Qantas Airways Ltd., newspapers including the Financial Times and Canada's Globe and Mail have reported.

Goldman Sachs's buyout unit raised an $8.5 billion fund last year and plans to seek as much as $10 billion for a new investment pool. The company's buyout funds have invested more than $17 billion of equity in 500 companies from U.S. clothing maker Polo Ralph Lauren Corp. to South Korea's Kookmin Bank since 1986.

Private-equity firms have announced a record of more than $630 billion of takeovers this year, according to data compiled by Bloomberg. Buyout funds have amassed $170 billion as of October, also a new high, according to London-based Private Equity Intelligence Ltd.

Carlyle, based in Washington and manager of the largest U.S. buyout fund, has made 21 investments in aerospace and defense including United Defense Industries Inc. and Vought Aircraft Industries Inc., according to its Web site. Cerberus, based in New York, manages about $22 billion in capital and its chairman is former U.S. Treasury Secretary John Snow.

Cerberus chief operating officer Mark Neporent declined to comment, as did Carlyle spokesman Chris Ullman.

Raytheon's shares fell 47 cents to $52.35 at 4:02 p.m. in New York Stock Exchange Composite trading. They've gained 30 percent this year, compared with a 13 percent increase by the Standard & Poor's 500 Index.

Shares of Onex were unchanged at C$28.60 in Toronto. They've risen 51 percent this year, compared with a gain of 15 percent by the S&P/TSX Composite Index.

To contact the reporters on this story: Brett Cole in New York at coleb@bloomberg.net; Frederic Tomesco in Montreal at tomesco@bloomberg.net.

Last Updated: December 7, 2006 16:27 EST