air and space Airbus Sells Defense Electronics Unit

Private equity firm KKR has agreed to buy Airbus Group's defense electronics unit for €1.1 billion as part of its reorientation toward civil aviation.

Airbus is shaking up its defense and space division with the sale of its defense electronics unit to U.S. private equity firm KKR for €1.1 billion ($1.2 billion).

The deal, which comes after months of negotiations and was agreed on Friday, will allow Airbus to focus on its civil aviation business.

Airbus plans to keep a minority stake in the defense electronics unit, based in the German city of Ulm, to ensure a "smooth transition for employees."

The defense electronics unit, which has 4,000 employees worldwide, manufacturers military sensors, devices for electronic warfare and electronic systems for military aircraft.

KKR will not be buying the border security devices, which includes the manufacture and installation of biometric systems in airports as well as surveillance systems to monitor border areas in Algeria, Romania and Saudi Arabia among other countries. These weren't included in the sale, as any deal would be complicated by the fact that Airbus clients have a say in any ownership change in this area.

Airbus will focus on combat and transport aircraft in the future. Drones could also become part of the mix if European governments invest more in the technology.

The sale of the defense electronics unit is part of chief executive Tom Enders' campaign to reorient Airbus toward civil aviation, as Europe's defense spending has been hit by the financial crises and austerity budgets.

Airbus had tried to reduce competition for shrinking military budgets by merging with British-controlled BAE in 2012, but German Chancellor Angela Merkel personally intervened to squash the deal.

When it comes to defense systems, Airbus will focus on combat and transport aircraft in the future. Drones could also become part of the mix if European governments invest more in the technology.

Tom Enders, Airbus CEO, is redefining the defense division

 

There are also major leadership changes in the works at the defense and space division. Francois Auque, 59, will turn over the reigns of the division's space systems to Nicolas Chamussy, who previously ran Mr. Enders' office. Dirk Hoke, who recently joined Airbus from Siemens, will head up the division's defense systems from April, an appointment that was announced last year, and will be honored after the KKR sale.

Mr. Auque supposedly resigned on his own volition, wanting to take on other assignments after working in space systems for 16 years. In a letter obtained by Handelsblatt, however, Mr. Auque tells his subordinates that Mr. Enders asked him to take on other responsibilities starting in July. Mr. Auque will work within the company as a consultant.

Mr. Auque was previously overseeing the delayed merger of Airbus' rocket production with France's Safran. In public, Mr. Enders only criticized state authorities for the delay, but it was clear during a January press conference, however, Mr. Auque couldn't provide a date for when the merger would be complete.

 

Thomas Hanke is Handelsblatt's correspondent in Paris. To contact: [email protected]