Carlyle to buy airlines’ Arinc

From combined dispatches

The Carlyle Group will acquire Arinc Inc., a private communications and engineering firm headquartered in Annapolis and owned largely by major airlines.

Details of the acquisition by the D.C. private equity firm were not released, but the airlines that hold 90 percent of Arinc stock stand to make millions, according to filings with the Securities and Exchange Commission yesterday.

AMR Corp., the parent of American Airlines, said it expects to get $194 million in proceeds and record a gain of $140 million when the sale closes Oct. 31.

UAL Corp., the parent of United Airlines, said in a filing that it expects to get more than $125 million and gain more than $40 million for its share.

The airlines announced in April that they planned to sell Arinc, a 77-year-old military and aviation communications company.

Arinc had $890 million in revenue in 2005, two-thirds of it from the U.S. military. The company makes wireless communications systems for the military and for air-to-ground communications in the commercial aviation industry.

Arinc is “no longer a core business and it’s nice to have the cash,” George Hamlin, managing director at Airline Capital Associates Inc. in Fairfax said yesterday. “Airlines need to concentrate on getting their own financial houses in order.”

Arinc has been owned by airlines since its formation in 1929, spokeswoman Linda Hartwig said. Its systems are behind 13 million air-travel messages a day, or 70 percent of global air-to-ground communications for airlines.

“We have long admired Arinc’s leadership position and impressive track record of growth,” said Peter Clare, Carlyle’s managing director and head of its Global Aerospace and Defense sector. “We believe that Arinc is well positioned to capitalize on several favorable macro trends in both its commercial and government market segments.”

Airlines already have shed ownership in businesses such as catering and the Orbitz online travel company, Mr. Hamlin said.

Since the September 11, 2001, terrorist attacks, Arinc has developed a system that would allow first responders to an emergency such as police officers and firefighters to communicate with one another.

“We feel our company has huge potential,” Ms. Hartwig said. “The airlines are not able to place a lot of equity in our company. In order to continue to grow, we needed a private-equity investment.”

The deal is subject to regulatory approval and is expected to close by Oct. 31.

Arinc has regional offices in London and Singapore, and employs more than 3,300 people.

The company said in its 2006 annual report that its other owners include Air Canada, Air France-KLM Group, Alaska Air Group Inc.’s Alaska Airlines, Boeing Co., British Airways PLC, Continental Airlines Inc., Delta Air Lines Inc., Hawaiian Holdings Inc.’s Hawaiian Airlines, Deutsche Lufthansa AG, Scandinavian Airlines System AB, Swiss Air Transport, Taca International Airlines and US Airways Group Inc.

Boeing Co., Ford Motor Co. and Goodyear Tire & Rubber Co. also are listed as principal shareholders.