Private Equity Said to Lead Bids for Airbus Defense Assets

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Buyout firms are dominating the bidding for defense assets that Airbus Group SE is seeking to sell, with only a handful of specialist industrial players in the running, according to people familiar with the talks.

Carlyle Group LP, KKR & Co. and Blackstone Group LP are among private-equity firms that bid in the first stage of the auction, said the people, who asked not to be named because the disposal process is private. Rheinmetall AG and Thales SA also submitted proposals by a July deadline, another person said.

Airbus, which said last September it would sell some units to focus on civil aerospace, is seeking a buyer for operations with 2015 revenue estimated at 1.1 billion euros ($1.2 billion), according to an advertising document obtained by Bloomberg.

The assets for sale comprise Airbus’s defense sensors and border security businesses, limiting the Toulouse, France-based company’s non-airliner activity to military aircraft, missiles, space launchers and satellites. A deal with a private-equity firm could let Airbus offload all of the unwanted operations rather then seeking industry buyers for each.

Airbus spokesman Rainer Ohler said he couldn’t comment on the progress of the auction. Neither Catherine Armstrong, a spokeswoman for Washington-based Carlyle, nor Andrew Dowler at New York-based Blackstone would comment. Kristi Huller and Ludo Bammens, spokespeople for KKR, which is also based in New York, didn’t respond to e-mailed requests for comment.

Project Orlando

Emmanuelle le Fol, a spokeswoman at Thales, where military interests span air-defense systems, battlefield communications and drones to border security, declined to comment after the French company said previously it might bid. Rheinmetall, the Dusseldorf-based maker of armored vehicles, ammunition and anti-aircraft weapons, said no one was available to comment.

The assets for sale should produce total earnings before interest, tax, depreciation and amortization of 90 million euros to 100 million euros in 2015, according to Airbus’s June document on the disposal plan, known as “Project Orlando.”

About 50 percent of their sales comes from ground systems, 40 percent from airborne platforms, less than 10 percent from maritime activities and less than 5 percent from space.

Geographically, 35 percent of revenue is derived in Germany and 30 percent in the rest of Europe. The German government holds a veto over the sale of some sensitive defense assets and could play a role in the disposal process.

Sat-Coms Disposal

The border-security business, which includes land and maritime surveillance, has annual revenue of about 200 million euros, and defense sensors some 900 million euros, comprising electronic warfare and radar units and a smaller optronics arm that makes periscopes for submarines, plus a support division.

Airbus has separately agreed to sell its ASGI unit, a supplier of satellite communications to the U.S. government, to Satcom Direct Communications Inc., the Florida-based buyer said in a statement today, without announcing terms. The business was earmarked for disposal with the other assets last September but isn’t part of the Orlando package, Airbus said.

Airbus initially decided in 2013 to simplify the structure of its defense and space operations after acknowledging that they could never match the scale of an airliner business that competes with Boeing Co. to be the world’s biggest.

After securing thousands of orders for its new A350 wide-body plane and the re-engined A320neo narrow-body, the focus for the next few years is on accelerating monthly build rates to unprecedented levels to meet delivery commitments.

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