Carlyle Looks To Sell Arinc

NEW YORK (Reuters) – Private equity firm Carlyle has hired Goldman Sachs Group Inc (GS.N) to sell aerospace and defense company Arinc, a source familiar with the matter told Reuters.

The company has not sent out a sales prospectus to potential buyers yet, and an auction will likely not start for another few weeks, the source said. The person spoke on condition of anonymity because the process has not been made public.

Carlyle and Goldman Sachs were not immediately available for comment.

Arinc, which provides communications and engineering solutions for the U.S. Department of Defense, the U.S. government as well as commercial clients, will likely draw interest from other private equity firms as well as some defense companies.

Private equity firms have finally managed to exit some of their investments in the past few months, taking advantage of higher stock market values and more confident strategic buyers.

The firms are also buying assets after a long drought. In this case, they might have to compete with strategic rivals who could also be eyeing Arinc.

Top executives of defense companies such as Lockheed Martin (LMT.N), L-3 Communications (LLL.N) and Goodrich Corp (GR.N) told Reuters in December they plan to spend up to $1 billion on acquisitions this year, focusing on intelligence surveillance and reconnaissance, cybersecurity, energy security, logistics support and healthcare information technology.

VALUATIONS

Deal valuations in the aerospace and defense sector now range from seven to 10 times EBITDA (earnings before interest, taxes, depreciation and amortization), depending on the company.

Higher-multiple companies usually have key proprietary technologies, are in high-growth areas, or have access to customers in the intelligence arena.

Annapolis, Maryland-based Arinc was founded in the 1920s, providing a communications system for the major U.S. airlines.

In 2007, Carlyle bought Arinc for an undisclosed amount from six airlines including American Airlines (AMR.N). (Reporting by Jui Chakravorty, Additional reporting by Megan Davies; Editing by Gary Hill)