Blackstone, Warburg among bidders for Carlyle's Arinc: sources

NEW YORK Thu Jun 27, 2013 2:02pm EDT

NEW YORK (Reuters) - Blackstone Group LP (BX.N) and Warburg Pincus LLC are among the buyout firms through to the second round of the auction for Carlyle Group LP's (CG.O) aerospace communications firm Arinc Inc, several people familiar with the matter said this week.

Private equity firms Hellman & Friedman LLC, Advent International Corp and BC Partners Ltd are also participating in the process, the people said. Meetings with Arinc's management are under way and no final bid date has been set, they added.

Private equity's strong interest in Arinc offers Carlyle more options if an attractive offer fails to materialize from an industry conglomerate, which would be expected to pay more due to the synergies it can extract.

Rockwell Collins Inc (COL.N), Lockheed Martin Corp (LMT.N) and Thales SA (TCFP.PA) are currently also participating in the Arinc sale process, the people said. But General Electric Co (GE.N), which was also interested in Arinc, is now out of the process, the people added.

A sale of Arinc, which Washington, D.C.-based Carlyle bought in 2007 from a group of U.S. airlines, could fetch between $1.3 billion and $1.5 billion, the people said.

Arinc, Carlyle, Rockwell Collins, Blackstone, Warburg Pincus, Hellman & Friedman and BC Partners declined to comment. Lockheed Martin, GE and Advent did not respond to requests for comment.

Annapolis, Maryland-based Arinc, founded in 1929, designs systems that help airline pilots communicate with the ground. It also provides transport communications and systems for the defense, government, healthcare, networks and security sectors.

At stake in Arinc's sale is Carlyle's reputation as one of private equity's most savvy investors in the sector. Its successful track record includes army vehicle and equipment maker United Defense Industries Inc, aviation parts distributor Aviall Inc and aircraft engine manufacturer Avio SpA.

Carlyle tried to sell Arinc in 2010 but abandoned efforts after industry players expressed little interest in purchasing the company as a whole, partly due to concerns over Arinc's government consulting services, sources said at the time.

Many defense companies had long offered services that included advising government agencies on programs on which they ended up bidding, creating conflicts of interest. That prompted the U.S. Congress to pass a law requiring the Department of Defense to tighten rules on potential conflicts.

Arinc addressed this by selling its government consulting division to Booz Allen Hamilton Holding Corp (BAH.N), another Carlyle-backed company, for $154 million last year.

JPMorgan Chase & Co (JPM.N) and Evercore Partners Inc (EVR.N) are advising Carlyle on Arinc's sale, people familiar with the matter told Reuters in February.

(Reporting by Soyoung Kim and Greg Roumeliotis in New York; Editing by Nick Zieminski)

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