Carlyle Looks to Exit Arinc

Private equity firm Carlyle Group is looking to sell part of its aerospace and defense portfolio company Arinc Inc., more than a year after efforts to sell the company as a whole failed, according to people familiar with the matter. The Annapolis, Maryland-based company consults with the military and designs systems that help airline pilots communicate with the ground. Carlyle, which bought Arinc for an undisclosed sum in October 2007 from six U.S. airlines, tried to sell the company in 2010 but scrapped the auction after strategic buyers expressed little interest in purchasing the company as a whole, people familiar with the matter told Reuters then.

PRESS RELEASE

(Reuters) – Private equity firm Carlyle Group LP is looking to sell part of its aerospace and defense portfolio company Arinc Inc, more than a year after efforts to sell the company as a whole failed, according to people familiar with the matter.

 

The potential sale of Arinc’s government consulting services business could pave the way for an eventual sale or initial public offering of the rest of the company, which is much larger and seen as more attractive than the services unit, the sources said. UBS AG has been mandated to run the process, they said.

 

The Annapolis, Maryland-based company consults with the military and designs systems that help airline pilots communicate with the ground. Arinc also provides technical analysis and engineering services to the U.S. Department of Defense and U.S. armed forces.

 

The unit is expected to have some $30 million of earnings before interest, tax, depreciation and amortization (EBITDA), roughly a fifth of the entire company’s EBITDA, two of the sources said. It may fetch 6-7 times EBITDA in a sale, they said.

 

Representatives of Carlyle and UBS declined to comment.

 

Carlyle, which bought Arinc for an undisclosed sum in October 2007 from six U.S. airlines, tried to sell the company in 2010 but scrapped the auction after strategic buyers expressed little interest in purchasing the company as a whole, people familiar with the matter told Reuters then.

 

The potentially interested parties at that time did not pursue the entire company partly due to concerns that Arinc’s government consulting services could create organizational conflicts of interest, the sources said previously.

 

Many defense companies have long offered services that include advising government agencies on programs they end up bidding for, creating a conflict of interest. That prompted the U.S. Congress to pass a law last year that requires the Department of Defense to tighten rules on potential conflicts at such companies.

 

Selling the services business now could make it easier to sell the rest of Arinc later, sources told Reuters this week.

 

Arinc, founded in 1929, helped develop systems used by aircraft to communicate with air-traffic controllers. (By Soyoung Kim)

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