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Deals

BAE close to unit sale as three firms bid: sources

NEW YORK/WASHINGTON (Reuters) - BAE Systems Plc BAES.L has asked three bidders for its Platform Solutions unit, including General Electric Co GE.N, to submit their "best and final" offers this week, a source close to the British defense contractor said on Tuesday.

GE, diversified industrial company Eaton Corp ETN.N and private equity firm Warburg Pincus WP.UL all put in bids in late December for the BAE business that makes aerospace parts including aircraft engine controls and that could fetch more than $1.6 billion, two other people familiar with the matter said.

The bidding round in December was intended to be final, but with three offers on the table, BAE Systems went back to the suitors and asked them to “sharpen their pencils,” the first source close to the company said.

BAE Systems hopes to reach a deal in coming weeks, the people said. They were not authorized to speak with the media and declined to be named.

The platform solutions group has long been seen by analysts and bankers fetching between $1.6 billion to $2 billion, but bid prices have dropped to the low end of the range as the auction progressed, several people familiar with the matter told Reuters previously.

BAE sought about 9-9.5 times the unit’s earnings before interest, tax, depreciation and amortization (EBITDA) of slightly less than $190 million -- or $1.7 billion to $1.8 billion -- but bidders wanted to pay below the range, sources said previously.

The actual amounts of the three bids could not be learned on Tuesday.

BAE spokesman Clark Dumont declined to comment on the sale process. Representatives for GE, Eaton and Warburg were not immediately available for comment.

GE, the largest U.S. conglomerate, is actively looking for deals in the industrials and healthcare sectors in an effort to deploy billions in cash after cost-cutting during the recession, and to boost the proportion of its revenue from industrials rather than from finance operations.

GE is a major customer of BAE's aircraft engine controls and is mainly attracted by the division of BAE's platform solutions group that makes aircraft-engine electronic controls for GE and for CFM International, sources said previously. CFM is a joint venture between GE and France's Safran SAF.PA.

BAE's platform solutions group also includes a commercial avionics business -- bought from Boeing Co BA.N in 2004 -- that makes aircraft components that help with navigation and surveillance, as well as a division that makes hybrid propulsion systems for buses and trucks.

JPMorgan Chase & Co JPM.N and Wells Fargo WFC.N are advising BAE Systems on the sale.

Reporting by Soyoung Kim and Andrea Shalal-Esa; Editing by Phil Berlowitz

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