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Buyout firm prepares to sell Maryland aerospace company

After purchasing Arinc Inc., from a conglomerate of airlines in 2007, Carlyle Group is reportedly preparing to sell the Maryland based defense and aerospace. The private equity firm has contracted Evercore Partners and JPMorgan Chase to serve as advisers on the planned business sale, which is expected to net Carlyle between $1.2 billion and $1.5 billion.

Carlyle previous attempted to sell Arinc in 2010, but that effort failed when it was unable to identify buyers willing to take the complete company as well as a price gap. It was, however, successful in selling the company's government consulting division in 2012, which experts say improve Carlyle's chances of unloading Arinc in the upcoming sale. Reuters reported that many potential buyers reportedly found that wing of Arinc undesirable in the first auction in 2010, citing concerns that the division could potentially result in organizational conflicts of interest. The company will likely be considerably more attractive to defense and aerospace buyers.

Buyers' concern about a possible conflict of interest was likely prompted by a recent federal law introducing new Defense Department rules that crack down on such conflicts at defense companies. Lawmakers said the bill was necessary to address a recurring problem in which defense firms advised the government on programs for which they later made bids.

Arinc, which has designed airline communication systems since 1929, reported pretax and interest earnings of between $120 million and $125 million last year, but experts project its selling price could be over 10 times that amount. Sources close to the planned deal say they expect Carlyle to schedule the Arinc auction for spring of 2013, but could not release their names as the auction is private. Carlyle and its two advisers, Evercore and JPMorgan Chase, declined to comment on the news.

Source: Baltimore Sun, "Exclusive: Carlyle prepares to sell Arinc, hires banks - sources," Soyoung Kim, Feb. 25, 2013

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