Published: Tuesday, December 14, 2010, 5:00 AM
MOBILE, Ala. --?One of Mobile’s largest employers and most established aerospace manufacturers on Monday announced that it was selling its local business to a Chinese conglomerate.
Under the agreement, AVIC International Holding Corporation will pay Teledyne Technologies $186 million cash for its subsidiary, Teledyne Continental Motors.
Continental, which employs roughly 400 workers at its manufacturing facility at the Brookley Aeroplex and a small aircraft service facility in Fairhope, has been in Mobile since the 1960s.
Officials with Teledyne and AVIC International, joined by Mobile Mayor Sam Jones, announced the sale during a Monday afternoon meeting with reporters and editors at the Press-Register.
Executives with AVIC stressed that the company sees the purchase as an investment in Mobile rather than a move to acquire the brand and relocate manufacturing operations to China. The company is committed to retaining the management staff and keep Continental’s headquarters in Mobile, they said.
For the past several months, AVIC has been scouting Mobile’s investment climate and studying Continental’s operations and capacity to expand, said Tian Shan, AVIC’s vice president of supply chain.
“We found great opportunity to invest here in the purchase of Continental,” she said. “We have a plan to provide additional investment based on the international market.”
“We’re not selling to a financial buyer who is going to rip, strip and flip, and that’s the thesis of the acquisition. This is someone who has a vested interest in growing the business, ” said Jason Van Wees, vice president of investment for Teledyne.
With an exploding middle class, China’s domestic general aviation market is currently underdeveloped, Van Wees said.
Although China’s population is four times that of the U.S. population, there are only 900 general aviation aircraft in the country, contrasted with 230,000 such aircraft in the U.S, he said.
Asked why Teledyne is divesting itself of Continental given China’s market potential, Van Wees said that Teledyne, primarily an electronics firm, lacked the connections in the Chinese aerospace market to capitalize on the opportunity.
AVIC is already an established aerospace manufacturer and has experience in developing aviation markets, Tian said, so the deal made sense for both parties.
Based in Beijing, AVIC is a major Aerospace player, counting Boeing, Airbus and Honeywell among its clientele. AVIC’s seven listed companies took in $6 billion in sales last year.
In addition to the growth potential of the Chinese market, AVIC wants to capitalize on Continental’s recent acquisition of next-generation diesel technology.
Rhett Ross, Continental’s president, said the expansion of diesel-engine development will probably be the first change in the Mobile plant’s operation and could result in some capital investment and the additional hiring of some engineers.
As for future expansion and when that might take place, Ross said it was too early to tell.
The sales agreement probably won’t even be closed until March, he said. After that, AVIC will need some time to take stock of what they bought.
“They want to come in establish and stabilize their business with us and then look to develop a strategy to expand on that,” he said. “I can say that, in meeting with management team, they have a number of ideas that would include expansion into the broader general aviation sector, we just have to get through the initial transaction.”
Jones said the city hasn’t promised any incentives to AVIC and his role has been primarily to sell the city as a good place to do business.
AVIC President and CEO Wu Guangquan personally visited the city and met with Jones before the final deal was agreed upon.
“We were attracted to Mobile’s international environment focus and the continually growing concentration of aviation-related international companies in the Mobile area,” Wu said in a statement.
Asked whether the move was tied to EADS’ bid to build mid-air refueling tankers in Mobile, Ross said there might be some opportunities for AVIC to take advantage of its new facility if EADS is successful.
AVIC already produces wing-box assemblies for Airbus, a subsidiary of EADS, Ross said. ?
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