Mid-East Investors Reportedly Close To Finalizing Deal

An insider report of a bid by a consortium of Mid-Eastern investors to purchase Textron published by a Kuwaiti newspaper last week caused sagging shares of company stock to post a gain of almost 50 percent last Thursday.

The Wall Street Journal reports Kuwait's Al-Watan newspaper disclosed last week that a consortium of United Arab Emirates companies and a Kuwaiti firm have offered $21 a share for Textron, Inc., over twice Wednesday's closing share value of $9.11. Spirited trading on Thursday spiked Textron stock up another $4.45, closing at $13.56.

A conglomerate comprised of several unrelated businesses in addition to Cessna, Bell Helicopters, and its defense contracting, Textron also owns E-Z-GO golf carts, electrical toolmaker Greenlee, Jacobsen lawnmowers, and auto parts makers Kautex and CWC. Al-Watan said the UAE consortium is primarily interested in Textron's civil industries - mainly the Cessna Aircraft Co. - and would likely sell off Textron's defense operations to a US company.

According to The Boston Globe, Citi Investment Research analyst Jeffrey T. Sprague said that breaking up Textron would probably benefit shareholders. "This type of scenario would likely solve one of the key problems in realizing Textron's full value, namely that Textron has many pieces which would fit well with other companies, but all of Textron does not fit well with any one company," Sprague said. "Clearly the US government would not let (Bell Helicopters or the defense systems business) fall into foreign hands."

Macquarie analyst Robert Stallard offered that a buyout by a Middle East consortium would make more sense than selling the company to a large defense contractor. "A couple of entities in the [Middle East] region have a track record of investing in aerospace, and the region as a whole has been a long-term purchaser of business aviation, and so we believe there is good awareness of the value of the Cessna brand, even if it is in a downturn at the moment," Stallard said.

When asked for comment, Textron spokeswoman Karen Gordon said, "It's our policy not to comment on market rumors."

FMI: www.textron.com, www.cessna.com