By Calvin Biesecker
Reeling financially from losses in its finance business and a difficult economy in general, Textron [TXT] on Friday said it has agreed to sell one of its defense business units to Woodward Governor Co. [WGOV] in a deal that will generate about $265 million in cash after taxes.
Textron is selling its HR Textron business unit for $365 million. The business makes actuation systems, turret controls, gun stabilization systems, servovalves and fuel system components to a range of leading weapons such as the F-35 Joint Strike Fighter, Joint Direct Attack Munition, M1 Abrams Tank and more.
Indicating that the deal is a win-win for Textron and Woodward, Lewis Campbell, Textron’s chairman and CEO, said in a statement, “This transaction is an excellent value for Textron and Woodward and is consistent with Textron’s financial strategy and our defense and intelligence systems strategy with the Textron Systems segment.”
Textron Systems is Textron’s defense segment, which performed well for the company last year. But Textron’s financial segment swung to a $50 million loss last year on higher loan loss provisions and borrowing costs. The company’s Industrial segment also dipped to a loss in the fourth quarter and profits at its Cessna aircraft segment began to plummet in the quarter.
Amid the recession, Textron has been cutting back on spending, leaning the organization and freezing salaries to maximize cash flow and operating performance. The company had a net loss of $209 in the fourth quarter and overall profits last year were nearly half what they were in 2007.
Textron said the sale will nip about 5 cents from earnings per share, including a small gain that is expected to be generated by the transaction. HR Textron had $260 million in sales last year. The deal is expected to be completed in April.
Woodward is a designer, manufacturer and service provider of energy control and optimization solutions for commercial and military aircraft, turbines, reciprocating engines and electrical power system equipment. Woodward expects the transaction to be neutral to earnings this year and accretive in 2010. HR Textron employs 912 people.