Carlyle, Nordic Capital Said Among Bidders for Volvo Engine Unit
Buyout firms Carlyle Group LP and Nordic Capital are among contenders in the second round of bids for Volvo AB (VOLVB)’s aircraft engine unit, according to three people with knowledge of the process.
MTU Aero Engines Holding AG (MTX), a Munich-based aircraft-engine maker, also submitted an offer for the Volvo subsidiary, which may fetch about 1 billion euros ($1.3 billion), said two of the people, declining to be named because the process is private. Management presentations on the unit will take place in the next few weeks, the people said.
MTU and Volvo, based in Gothenburg, Sweden, already cooperate on some engines, such as the JT8D program that powers the Boeing Co. MD-80 family of aircraft. The companies also work together on Pratt & Whitney’s so-called geared turbofan engine that will power upgraded Airbus SAS single-aisle jets.
Spokesmen for MTU and Volvo both declined to comment on the process. Officials at Carlyle and Nordic Capital also declined to comment.
Volvo said last month it would separate the aero-engine unit, whose engines equip Saab AB (SAABB)’s Gripen fighter jet, to focus on heavy trucks and construction equipment, its biggest structural shift since the company split off its passenger-car division a decade ago.
Some automotive manufacturers are turning to spinoffs and asset sales to focus on narrower product ranges and streamline investment requirements. Italian carmaker Fiat SpA (F) in January spun off Fiat Industrial, its truck and tractor business.
In addition to complete engines, Volvo’s aero-engine unit makes components including compressor rotors, turbine structures and fan cases. The division’s operating profit fell 54 percent to 102 million kronor ($15 million) in the third quarter after sales fell 22 percent, clipped by currency fluctuations and the sale of its service activities.
The Swedish truckmaker has been active in aviation systems since the 1940s, and the business traces its roots to a Swedish Air Force order for 40 aircraft engines placed with a locomotive manufacturer in 1930.
Volvo Aero will develop and manufacture components for the Pratt & Whitney PW1100G turbine that will power Airbus (EAD)’s re- engined A320neo. That deal should generate 40 billion kronor in revenue over 50 years, according to Volvo. The company has also worked on the Engine Alliance powerplant for the A380 superjumbo, helping make the engine more efficient.
Volvo is the world’s second-largest maker of heavy trucks after Daimler AG (DAI), and also sells industrial and marine engines as well as buses. The company separated from its car division in 1999. Volvo Car Corp. is now owned by China’s Zhejiang Geely Holding (175) Group Co.