Cirrus Aircraft: Will U.S. investors fend off buyout by Chinese firm?

General aircraft manufacturer Cirrus Industries Inc. announced on Feb. 28 that it will be acquired by China Aviation Industry General Aircraft Co. Ltd., a business unit of Aviation Industry Corp. of China, or AVIC.

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General aircraft manufacturer Cirrus Industries Inc. (Duluth, Minn.) announced on Feb. 28 that it will be acquired by China Aviation Industry General Aircraft Co. Ltd. (CAIGA, Zhuhai, China), a business unit of Aviation Industry Corp. of China, or AVIC. The terms of the deal were not disclosed. Within two weeks, however, Brian Foley, president of general aviation-related consulting firm Brian Foley Associates (BRiFO, Sparta, N.J.), claimed that he and his firm will attempt to quash the Cirrus/AVIC transaction, solicit capital support from U.S. investors and reach out to Cirrus’ primary owners to see if they’d accept a serious counter-offer.

“Cirrus is an American success story that started in a humble dairy barn, and introduced important new technologies and rocketed to market leadership. What surprised me was the speed, passion and near-unanimity of the feedback we received from the aviation community,” says Foley, pointing out, “People want this company to be owned and operated on American soil, period.” Cirrus executives have, so far, downplayed risk associated with the impending deal, noting that relocation to China is unlikely and that Cirrus is not presently American-owned: Arcapita, a Bahrain-based investment group, owns a 60 percent share.

If the AVIC transaction goes forward, Cirrus says the deal is expected to close in mid-2011, subject to customary closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act and by the U.S. Government’s Committee on Foreign Investment in the United States (CFIUS), as well as all relevant Chinese government approvals.

Acquisition of Cirrus will mark the third takeover by AVIC of a U.S. aviation company. AVIC previously bought the assets of Bend, Ore.-based Epic Aircraft (reported by HPC in May 2010) and aviation engine-builder Continental Motors (Mobile, Ala.) in December 2010.

Cirrus Aircraft has led sales of four-place light aircraft for nine consecutive years, delivering nearly 5,000 new piston-engine composite airplanes during the last decade, and is second only to Cessna (Wichita, Kan.) in the sales of single-engine general aviation aircraft. According to Brent Wouters, Cirrus’s president and CEO, “This transaction will have a positive impact on our business and our customers because we share a common vision with CAIGA to grow our general aviation enterprise worldwide. CAIGA brings new resources that will allow us to expedite our aircraft development programs and accelerate our global expansion.” Says Cirrus’ chairman and cofounder Dale Klapmeier, “With this transaction, Cirrus will continue to develop and build the best, most exciting aircraft in the world. The original dream remains alive and well at Cirrus. We are just embarking on our next chapter on a global stage.”

CAIGA provides general aircraft products and related services and is headquartered in Zhuhai in the Guangdong Province of China. CAIGA’s president Meng Xiangkai says, “CAIGA is dedicated to being an international leader in the provision of general aviation products and services, and light piston aircraft is one of CAIGA’s business focuses. We are very optimistic to begin our partnership with Cirrus and add Cirrus’s strong brand as the cornerstone in our aviation product portfolio.” According to a published story in China Daily (dated March 2, 2011, by Xin Dingding) Meng was quoted as saying that CAIGA will also consider building a production line on the Chinese mainland to produce Cirrus planes at a lower cost, if demand in China and southeastern Asian countries warrants the move. In General Aviation News (March 16, 2011), Ben Sclair says that general aviation (GA) in China has nowhere to go but up: between 1999 and 2009, general aviation flight hours in China jumped from 40,000 to 130,000. In contrast, between 1999 and 2005, estimated GA flight hours in the U.S. fell from 27 million to 22 million, according to FAA statistics. While minimal compared to U.S. GA activity, Sclair says “Whether you are pro-China or not, China’s aviation market is opening up and growing.”

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