GE to buy aviation unit of Italy's Avio for $4.3 billion
By Danilo Masoni
MILAN (Reuters) - General Electric Co (GE.N: Quote) has agreed to buy the aviation business of Italy's Avio for $4.3 billion, in a sign of confidence about the country's underlying strength despite its deep recession.
The deal comes as Europe's fourth-biggest economy labors to become more competitive under a reform agenda set by technocrat prime minister Mario Monti, who is due to step down on Friday before general elections seen in February.
"We are convinced that Italy will exit the crisis," Nani Beccalli, president and chief executive of GE Europe, told reporters on Friday. "There are undoubtedly hurdles linked to red tape. But the strategic value of the deal is so big (it would offset other issues)", Beccalli said.
GE agreed to buy Avio from private equity fund Cinven and Italian state-controlled defense group Finmeccanica (SIFI.MI: Quote). The move frustrated the aspirations of France's Safran (SAF.PA: Quote) and Italy's state-backed Strategic Fund, which had been trying over the last few months to take over Avio.
GE, whose businesses range from infrastructure technology to financial services, said Avio would boost its global supply chain capabilities as its engine production rates rise to meet growing customer demand.
Avio, which makes components for the GE Dreamliner engine used by Boeing Co (BA.N: Quote), ranks among Italy's industrial jewels and is one of the most technologically advanced companies in its field.
William Blair & Co analyst Nick Heymann said the move, which amounts to GE buying a supplier to its jet engine program, was intended in part to protect new technologies.
"They're trying to get more vertically integrated and have more control over critical aspects of the manufacturing process," he said. Continued...