General Dynamics to Buy Switzerland's Jet Aviation

General Dynamics, maker of the Gulfstream IV seen here during an April 13, 2007 inspection, purchased Jet Aviation today. General Dynamics, which operates almost exclusively in the United States, will use Jet Aviation to expand its network into Europe and Asia. Credit: AP Photo/Nathaniel Brooks

WASHINGTON (AP) — Defense contractor General Dynamics said Tuesday it will buy Jet Aviation for about $2.25 billion in cash, seeking to expand its private jet business and tap into fast-growing overseas demand for luxury planes.

Falls Church, Va.-based General Dynamics makes business jets at its Gulfstream unit. With the purchase of Zurich-based Jet Aviation, it adds a worldwide network of aircraft maintenance centers and service centers where wealthy individuals and cash-rich governments can outfit private jets with plush interiors and custom features.

Analyst Cai von Rumohr of Cowen and Co. said in an investor note that the deal was a "great fit" for General Dynamics and its aerospace unit.

"Jet Aviation brings GD a complementary portfolio of services, global presence and 'trusted partner' image that should bolster potential to hold/expand market share of its Gulfstream products, particularly abroad," he wrote.

General Dynamics will acquire all of Jet Aviation's shares from current owner Dreamliner Lux S.a.r.l, a company controlled by the British investment fund Permira Funds. The deal is expected to close by the end of the year if it clears regulatory scrutiny.

The company has seen orders for its Gulfstream jets grow in the past several years, as wealthy buyers from burgeoning areas like the Middle East and China have helped push international sales past those in North America, traditionally the largest market for private jets.

International orders at Gulfstream topped U.S. sales for the first time last year and the company recently introduced its largest and widest-ranging jet, the G650. Orders have been strong for the plane that costs roughly $60 million.

Jet Aviation generates roughly 60 percent of its sales in Europe, Middle East and Asia and has 25 service and maintenance centers in Europe, the Middle East and North and South America. By comparison, General Dynamic's aerospace unit, which includes Gulfstream, has 12 service centers, with all but one located in the United States.

Nicholas Chabraja, General Dynamics' chief executive, said Jet Aviation's network is what drove the company's interest in the sale.

"This is a business for us that is blessed with opportunity," he said.

General Dynamics expects Jet Aviation to contribute sales of $1.5 billion in 2009 and post revenue growth of between 10 percent to 12 percent, Chabraja said. The company employs 5,600 employees worldwide and its U.S. headquarters are in Teterboro, N.J.

Chabraja said General Dynamics first tried to buy Jet Aviation three years ago but lost out to private investors.

Shares of General Dynamics rose 21 cents to $92.45 in late morning trading Tuesday. The stock has traded between $74.01 and $95.13 in the past year.

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