GE to Acquire Avio's Aviation Biz

GE Aviation, an operating unit of General Electric Company (GE - Analyst Report), recently announced the acquisition of the aviation business of Avio S.P.A for $4.3 billion. The aviation business will be acquired from Cinven – a European private equity firm and Finmeccanica – an Italian aerospace group.

Headquartered in Turin, Italy, Avio primarily manufactures aviation propulsion components and systems for civil and military aircrafts and employs roughly 5,300 people, including approximately 800 in the space unit. However, the acquisition excludes the space unit. General Electric enjoys a long-standing relationship with Avio. Avio has been supplying components to the American Conglomerate since 1984 with more than half of the revenue derived from components for General Electric and General Electric joint venture engines. Avio generated $2.4 billion in revenues in fiscal 2011.

Through this acquisition, GE aviation will have a greater participation in the jet propulsion business, the most attractive sector of the aviation industry. The acquisition is a strategic move by GE aviation to capitalize on Avio’s capabilities to expand beyond aviation and strengthen its customer relationships. Apart from strengthening its position in the aviation industry, GE also intends to pursue new opportunities in power generation, oil and marine products. In addition, this transaction is expected to further bolster GE's global supply chain capabilities as its engine production rates continue to rise in order to meet growing customer demand.

General Electric operates as a technology and financial services company. Its segments include Energy Infrastructure, Aviation, Healthcare, Transportation, Home & Business Solutions and GE Capital. Evendale-based GE Aviation is a leading provider of jet, turboshaft and turboprop engines and components and integrated systems for commercial, military, business and general aviation aircraft.

General Electric currently has a Zacks #4 Rank, which translates into a short-term Sell rating. We also have a long-term Neutral recommendation on the stock. One of its competitors, Siemens AG (SI - Analyst Report) also holds a Zacks #4 Rank.