By Amnon Barzilai
Israel Aircraft Industry has sold its Galaxy Aerospace Corporation subsidiary to
(NYSE:GD) for $330 million in cash.
The Falls Church, Virginia-based defense contractor will pay up to $315 million more contingent upon the achievement of specific revenue mnilestones over the next six years.
The deal, the largest in IAI's history, was signed yesterday in New York by CEO Moshe Keret and Nicholas Chabraja, the chairman and CEO of General Dynamics.
yesterday that it is an "amazing" deal in all respects and that it guarantees work for the company's civil aviation division for many years to come. The division currently employs approximately 3,000 workers.
Galaxy Aerospace was formed in 1997 as a joint venture by IAI and the Hyatt Corporation. At the time, IAI's project of developing the Galaxy executive jet had run into financial difficulties, and the government refused to continue to back the program unless a foreign partner was recruited.
According to the deal, General Dynamics will acquire two new product lines for its Aerospace group: the Astra mid-size twin turbofan business jet, and the Galaxy, the first aircraft in the super mid-size class. The Galaxy, which entered service in January 2000, well ahead of its competitors, has the longest range and largest cabin volume in its category.
Both aircraft models will continue to be assembled by IAI and flown to Galaxy Aerospace's headquarters in Fort Worth, Texas in a "green" configuration; General Dynamics will design and install custom interiors and all optional equipment, according to a press statement released yesterday by General Dynamics.
IAI and General Dynamics expect to close the deal next month. Galaxy will then become part of General Dynamics's Aerospace group, which includes Gulfstream Aerospace.
General Dynamics also announced yesterday that Executive Jet Inc., a Berkshire Hathaway company, has placed an order for 50 of the Galaxy aircraft to be delivered over the next five years, with options for 50 more. Total value of the order, options and maintenance services is approximately $2 billion, according to General Dynamics.
"This acquisition gives General Dynamics immediate presence in the super mid-size and mid-size market - the fastest growing segment of the business aircraft market," said Chabraja. "The Galaxy and Astra SPX aircraft are superb products, complementing Gulfstream's GIV-SP, GV, and the new GV-SP. With a larger family of aircraft, we will attract and retain a broader range of customers, providing them with entry, move-up, and add-on opportunities. It greatly expands our competitive position - without the expense and time of product development."
"In addition," Chabraja said, "the acquisition also increases our revenue base for service, parts and refurbishment since Galaxy supports a worldwide fleet of more than 400 business jets, including previous Israel Aircraft Industries-built business jets such as the Westwind series."