Permira Selling Jet Aviation

NEW YORK (Reuters) – Gulfstream jet maker General Dynamics Corp (GD.N: Quote, Profile, Research, Stock Buzz) agreed to buy Swiss plane maintenance firm Jet Aviation for about $2.25 billion, expanding in a lucrative market as the global fleet of business jets hits an all-time high.

General Dynamics, a major U.S. defense contractor, said on Tuesday the deal for a firm that services and refurbishes planes would close by the end of the year and immediately add to earnings.

It comes two years after Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz) completed a similar deal by buying aerospace parts and maintenance supplier Aviall for about $1.7 billion.

“This acquisition will expand General Dynamics' franchise as the world leader in high-end business aviation products and services,” said Loren Thompson, defense analyst at the Lexington Institute. “It's a smart hedge against any post-Iraq downturn in defense spending and a vote of confidence in the global economy.”

General Dynamics shares were down 0.3 percent or 25 cents to $91.99 on the New York Stock Exchange after having fallen to as low as $91.

Zurich-based Jet Aviation, owned by private equity firm Permira Funds, provides maintenance, repair and overhaul services for business jets and other small aircraft. It also charters executive planes. Founded in 1967, it has 5,600 employees and bases at 25 airports around the world.

Following the acquisition, Jet Aviation will operate under its current management as a business unit within the General Dynamics Aerospace group — which includes Gulfstream — using its established Jet Aviation and Midcoast Aviation brands.

BIZ JET BOOM

Sales of business jets are on track to hit an all-time record this year, reflecting an explosion of wealth, mostly outside the United States, even as economies in Europe and Japan face contraction.

A three-year boom in global jet sales means record numbers of general aviation aircraft — mostly business jets and small, piston-engine aircraft — are flying around the world.

The surge in sales has boosted companies like General Dynamics' Gulfstream, Textron Inc's (TXT.N: Quote, Profile, Research, Stock Buzz) Cessna and Bombardier Inc (BBDb.TO: Quote, Profile, Research, Stock Buzz), along with an array of parts suppliers and maintenance firms.

Gulfstream, based in Savannah, Georgia, makes a range of larger and generally more expensive private planes. Earlier this year it announced the launch of its newest model, the $60 million G650, which will be the largest, fastest and longest-range business jet on the market when it is delivered in 2012.

General Dynamics, the Pentagon's fourth-largest supplier by contract value selling tanks, warships and military gear, is hoping the shift further into aviation will help offset any downturn in defense spending.

“There's some obvious synergies on the marketing side,” General Dynamics chief executive Nicholas Chabraja told analysts on a conference call. “(But) I don't think this is a cost play.”

Chabraja did not rule out additional acquisitions. He has led the company since 1997 and is set to retire next year, when he will be succeeded by Jay Johnson, a member of the company's board.

“I don't think it's time to stop,” he said on the call. “Certainly there is more room to grow the business.” (Reporting by Mark McSherry and Bill Rigby in New York, Andrea Shalal-Esa in Washington, Kyle Peterson in Chicago and Saumyadeb Chakrabarty in Bangalore; Editing by Maureen Bavdek)