Buffett poised to buy Jet Aviation
by Josh Kosman
TheDeal.com
Updated 03:29 PM EST, Aug-5-2002
Warren Buffett's Berkshire Hathaway Inc. is not only busy buying telecom and energy companies these days — it is also closing in on a deal for Jet Aviation International Inc., a charter aircraft company, for about $485 million, several sources said.
Jet Aviation, based in Zurich, Switzerland, is family-run and needs money to expand. Buffett owns a competitor, NetJets Inc. (the former Executive Jet), and is frequently seen in print ads boasting about its service.
Now the sage of Omaha may soon own the lion's share of the world's chartered fleet.
Jet Aviation, working with Goldman, Sachs & Co., started an auction in June, soliciting bids from Buffett, among others. Buffett made an offer of about $485 million and refused to pay more, a source said.
Expecting to attract an offer of more than eight times Jet Aviation's $65 million in Ebitda, or $520 million, the seller went on with the auction, several sources said. But with a week before final bids are due, there are few other suitors, and Buffett is set to become the viable alternative.
Suitors still bidding for Jet Aviation include the Texas Pacific Group and a team made up of Berkshire Partners and Greenbriar Equity Group. These bidders and others made preliminary offers that were better than Buffett's proposal but now may be presenting lower proposals in their final bids, sources said.
Press officers at Jet Aviation and Berkshire Hathaway declined to comment. A TPG spokesman declined to comment as well, and the partner leading the deal for the Berkshire-led team did not return calls.
Unlike his competitors, Buffett has yet to meet with Jet Aviation's management team, but he knows the industry well and owns a company that has synergies with Jet Aviation.
Berkshire Hathaway bought NetJets in 1998. The Woodbridge, N.J.-based company maintains and operates airplanes co-owned by its clients, guaranteeing them an available aircraft within a few hours' notice. NetJets rents planes when it does not have enough aircraft on hand.
Meanwhile, Jet Aviation operates more than 150 aircraft in the U.S., Europe, the Middle East and the Pacific Rim. If NetJets acquires Jet Aviation, it will be a way for it to further expand its fleet.
NetJets already has 265 airplanes on call; 500 new jets are on order.
Besides building its fleet, NetJets also likely finds Jet Aviation's fixed base operations attractive. Jet Aviation has a presence at business aviation destinations, including Teterboro, N.J.; West Palm Beach, Fla.; Europe and Saudi Arabia. Sixty percent of its business activity is in Europe.
Texas Pacific also has experience in the aviation overall industry. Two of the firm's founders made a fortune buying Continental Airlines out of bankruptcy so it too might think it has an edge.
This auction is a rematch of sorts.
Last year at this time, Texas Pacific Group, joining with Gildan Activewear Inc., was one of the final bidders for Fruit of the Loom. There, Buffett's Berkshire Hathaway, which had held a long interest in the business, swooped in late and won the prize. |
