General Electric in the lead to acquire Italy's Avio: sources

MILAN Thu Nov 15, 2012 3:39pm EST

MILAN (Reuters) - General Electric (GE.N) has emerged as the front runner to acquire Avio, a privately held airplane parts supplier, and will present its plans to Italian government officials on Friday, people familiar with the situation on Thursday.

"GE is in the lead at the moment," said one of the people familiar with the situation, adding that the sale is being managed by Cinven, a private equity fund that controls Avio.

The Italian government has special powers to safeguard the country's strategic defense industry assets after the cabinet passed new "golden share" rules in August. Therefore the meeting indicates that GE is being seriously vetted as a potential buyer.

The private equity owners of Avio are pressing ahead with talks to sell the company, as a planned listing looks less likely, sources close to the deal said earlier this month. Press reports have valued the company at more than 3 billion euros.

Avio, based in Turin Italy, supplies engine parts for the Eurofighter Typhoon and for General Electric and Rolls Royce (RR.L). It had 2011 revenue of more than 2 billion euros and adjusted earnings before interest, depreciation and taxes of 384.2 million.

In May Avio revived plans to go public, filing to list on the Milan bourse, but the following month sources told Reuters the company had postponed the offering for the second time in a year due to market conditions.

A consortium of buyers made up of private equity funds CVC Capital Partners and Clessidra, and state-backed Fondo Strategico Italiano (FSI) are also in talks to buy Avio, Reuters reported on November 2.

"Talks between Cinven with Clessidra, CVC Partners and FSI have stalled," said a second person familiar with the situation. "Meanwhile Cinven has been continuing talks with General Electric and, after a pause, with Safran (SAF.PA)." France's Safran has interests in airplanes, aerospace and defense.

"GE is very interested, but I don't know how far along the talks are," said the second person.

General Electric had no comment.

FSI is close to reaching an agreement with state-controlled defense company Finmeccanica (SIFI.MI) to acquire Finemccanica's 14 percent stake in Avio.

"Talks between FSI and Finmeccanica are at a very advanced stage," said a third person familiar with the situation. "FSI wants to start with a 14 percent stake in Avio and then build it up to 40 percent, possibly in conjunction with other investors."

General Electric could be such an investor.

(Reporting by Massimo Gaia; Writing by Jennifer Clark; Editing by Luca Trogni and Steve Orlofsky)