Cheng Shenzong, chairman of Superior Aviation Beijing. (Photo/CFP)
Market observers were surprised last week to learn a young private Chinese aviation company has plans to spend tens of billions of yuan buying US airplane maker Hawker Beechcraft.
Hawker Beechcraft, which filed for bankruptcy protection in May, has announced that it has reached an initial agreement to sell its civilian aircraft operations to the Beijing-based Superior Aviation Beijing Co for US$1.79 billion.
Superior will have exclusive negotiating rights for 45 days to buy Hawker Beechcraft's corporate jet and propeller plane operations, according to the Economic Weekly.
"If everything goes smoothly, the acquisition will be completed in two to three months," Qian Yuanchun, a source from Superior Aviation said.
Many have wondered how a little-known private company could afford to spend almost US$2 billion on the deal, and have speculated about the risks involved. But Qian says US$1.79 billion is not too high a price. Hawker Beechcraft was formed in 2007 after Goldman Sachs and Onex Corp bought Raytheon Aircraft from Raytheon for US$3.3 billion.
US media reports covered mixed views on the transaction price.
According to the Associated Press, Hawker Beechcraft is experiencing operational difficulties due to declining demand caused by the financial crisis and low investment by the company in research and development. Several analysts said that for a company struggling to survive, US$1.79 billion yuan was "quite a large sum of money."
Cao Jianhai, a professor at the Chinese Academy of Social Sciences, said there was high risk in a private Chinese enterprise buying a US firm for so much money. Given that Hawker Beechcraft was facing difficulties in its operations, it would be very difficult for the young Chinese company to turn the US aircraft around.