Dewey & LeBoeuf and King & Spalding are advising on the deal by which a Chinese state-owned company will acquire Cirrus Industries Inc. , a Duluth, Minnesota-based personal aircraft manufacturer. China Aviation Industry General Aircraft Co (CAIGA), based in Zhuhai in Guangdong Province, announced the deal on Monday, and will pay $210 million for the acquisition, according to Dewey. CAIGA is the general aviation division of Aviation Industry Corporation of China , a large state-owned enterprise (SOE) whose units build all kinds of aircraft, including jet fighters and helicopters.
Cirrus manufactures the popular SR22 single-engine plane. The company is well known in the general aviation community for designs that use composite materials and incorporate a parachute capable of lowering the plane to the ground in case of an emergency. Cirrus was previously owned by Arcapita , a Bahrain-based private equity fund.
Dewey & LeBoeuf partner Paul Chen, based in New York and Hong Kong, is advising CAIGA on all U.S. law issues relating to the transaction. The firm is working directly with CAIGA’s business team, while the Chinese aspects of the transaction were handled by CAIGA’s in-house legal team.
Cirrus is being represented by King & Spalding Atlanta partner Jon Harris, Jr., who is also advising Arcapita.
Light plane manufacturers have been hoping that China will emerge as a massive new market, as it has in the automobile industry. In August 2009, the state-run China Daily reported on efforts by Cirrus and competitors like Cessna Aircraft Co. to promote private aviation in China. A lack of suitable airfields and the Chinese government’s strict control of lower airspace remain the major obstacles.
“CAIGA is dedicated to being an international leader in the provision of general aviation products and services, and light piston aircraft is one of CAIGA’s business focuses,” Meng Xiangkai, CAIGA’s president said in a statement. “We are very optimistic to begin our partnership with Cirrus and add Cirrus’s strong brand as the cornerstone in our aviation product portfolio.”
According to a statement made by Brent Wouters, Cirrus’s president and chief executive officer, CAIGA will maintain production in Cirrus’s U.S. facilities in Minnesota and North Dakota, as well as bring in new resources that will allow Cirrus to expedite its aircraft development programs and accelerate its global expansion.
Dewey’s Chen believes that more such deals are to come. “I believe that the Chinese personal aircraft manufacturing industry will continue to expand to meet the demands from a growing affluent Chinese customer base who will want to access to private plans for both corporate and personal uses,” he says.
The transaction, expected to close mid this year, is subject to China government approvals and clearance under the Hart-Scott-Rodino Antitrust Improvements Act and by the Committee on Foreign Investment in the United States (CFIUS), an inter-agency committee of the U.S. government that reviews transactions for national security risks. Leading Chinese networking company Huawei Technologies was recently forced to withdraw its acquisition of $2 million in patents from a U.S. server company after a CFIUS review raised concerns about Huawei’s alleged ties to the Chinese military.
An aviation-industry deal with a Chinese SOE would normally face tough scrutiny, though piston-powered light planes like those made by Cirrus potentially raise fewer national security issues than advanced jets.
Chen declined comment on the CFIUS review, citing confidentiality requirements.