Analysts: New Company Must Develop New Models To Succeed

The deal recently inked between the Onex Corporation - Goldman Sachs partnership and Raytheon for the sale of Raytheon Aircraft is long from finished. Yes, all parties have agreed on the $3.3 billion price tag, and that the new company is to be called Hawker Beechcraft Corporation, but there are still many i's to dot and t's to cross before it's all over and done.

According to the Wichita Business Journal, there are months of due diligence and corporate and regulatory approval to come before the deal is complete -- about six months of work are still left, in fact.

The deal announced last month includes the sale of all of Raytheon Aircraft's facilities in Wichita, KS, Salina, KS, Dallas, TX and Little Rock, AR, as well as the company's FBOs in the US, UK and Mexico. The company has a total of 8,500 employees, with 6,300 in Wichita.

Although there are many corporate and legal hurdles left to leap, the most-often asked questions seem to revolve around foreign ownership issues. Raytheon Aircraft supplies the US military with the T-6A Texan II trainer, and many wonder how the US government will react to Canadian ownership of a company that supplies defense-related hardware.

Industry consultant William Alderman told the Journal, "It's a valid question. But if, for goodness sake, the British can build the transport for our president, do you think we'd have a problem with our neophyte pilots training in Canadian aircraft?"

Alderman is referring to the DOD's decision to award a Lockheed Martin-led consortium a contract for the presidential helicopter fleet. About a third of the construction for the new choppers occurs outside the US, with the largest part of that going to the UK.

Alderman says the biggest chance of a show-stopping problem will come during the due diligence inspection of Raytheon's books. If after reviewing the balance sheets the purchasing partnership believes it's been misled, the deal could collapse.

Be that as it may, says Alderman, "My personal experience has been is that when a term sheet has been signed, it's about a 70 percent probability the transaction will be completed."

What may be an even bigger obstacle to the fledgling company's ultimate success is the competition. Experts say the company will have to expand its product line if it's to compete in a market flooded with choices.

President and CEO of Cessna Jack Pelton told the Journal he's looking forward to competing with Hawker Beechcraft.

"Now that it becomes a stand-alone aircraft entity, that shows they're intent to be committed to the markets that they're in and the industry," Pelton says. "We're going to see some investments over time, and that's all positive."

FMI: www.raytheonaicraft.com