The deal is expected to return about €1bn of value for Cinven’s fourth fund, and follows the recent exits of Phadia and Ziggo, which generated 3.4-times and 2.8-times returns for the firm respectively.
BCV Investments, the acquisition vehicle backed by Cinven and Italian industrials group Finmeccanica, will retain control of Avio’s space unit - which makes parts for commercial satellites, for civil and military use and generated revenues of €297m last year – as part of the deal.
The majority of Turin, Italy-based Avio’s business comes from the sale of civil and military engines, while 14 per cent is sourced from space technology and two per cent from civil maintenance. It operates in four continents and employs about 5,300 people.
The company, which also supplies engine parts to GE, was put up for sale as the possibility of a long-awaited Milan listing faded amid continued market volatility in Europe.
Safran, a French company that has interests in airplanes, aerospace and defence, was also reported to be in active talks to buy the business, as were European buyout houses Clessidra, CVC and state-backed Fondo Strategico Italiano.
Avio generated revenues of more than €2bn last year – up 15.6 per cent on the prior year – and EBITDA of €383m – up 13.3 per cent on the previous year.
BCV bought the group in December 2006 for an enterprise value of €2.57bn, and since then its revenues have increased by 66 per cent and EBITDA by more than 50 per cent.
This was achieved in part by winning positions on new aerospace programmes and investing in management, including the appointment last year of former Indesit, Cable & Wireless and Omnitel Vodafone chief executive Francesco Caio as Avio’s new CEO.
The company also invested more than €700m in R&D and a large number of capital expenditure programmes, including Vega, the small space launcher, and the introduction of Ti-Al component manufacturing processes.
By working closely with the Cinven portfolio team in Asia, the London-based buyout firm also helped set up two joint ventures with Xian Aero Engines and Avic Harbin Dong’an Engine – both state-controlled aerospace businesses in China.
It also helped Avio make acquisitions in Brazil, the Netherlands and Poland.
“We were highly attracted to Avio given its growth qualities derived from the non-cyclical defence and space divisions,” Cinven partner Roberto Italia said in the statement.
“We enjoy a very constructive relationship with our partner, Finmeccanica, and the Italian institutions which have always been vigilant towards and proud of Avio’s success.”
The sale will help return cash to Cinven’s investors as it raises its latest fund, which is understood to have secured more than €4bn of its €5bn target so far.
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