Cinven’s first Italian investment

Avio, the Italian manufacturer of aeroengines and space propulsion systems, that was until June expected to go public, has been sold by owners Carlyle and Finmeccanica to Cinven for an enterprise value of €2.57bn.

Finmeccanica will reinvest some of its proceeds from the sale back into the company, taking a 15% stake, following approval of the deal from the competition authorities, expected in October 2006. This could even increase back to 30% eventually according to reports.

It is a landmark deal for Cinven, with Avio becoming the firm’s first Italian investment since it opened its office in Milan earlier this year. It is the third investment from Cinven IV, its €6.5bn fund it closed in June 2006.

The acquisition will be funded through a combination of equity from Cinven and Finmeccanica and debt provided by Banca Intesa, Citigroup, JP Morgan, Lehman Brothers, The Royal Bank of Scotland, and Unicredit.

Avio was formerly the aerospace arm of FiatAvio, and in September 2003 Carlyle and Finmeccanica acquired Avio for approximately €1.6bn. Carlyle Partners II and III owned a combined 70% and Finmeccanica the remainder.

Avio is present in Italy and abroad in 16 locations and has over 4,800 employees. In 2006, the company is forecasting sales of €1,395m and an EBITDA of €275m.