Cessna parent shares fly, regain some altitude on report of ME deal
April 11th, 2009 Posted in Defense, SWF
On Thursday, shares of Providence, Rhode Island-based Textron (NYSE: TXT) soared 49% to $13.56 on a report by a Kuwaiti newspaper that said investors from the UAE and Kuwait were eying a takeover at $21/share. Textron, the maker of Cessna Aircraft corporate jets and also a defense contractor (Bell Helicopters), traded as high as $65 last year, before spiraling down to as low as $3.50 last month. The problem with Textron is two-fold, although neither issue is likely to ground Middle East investors. First, its financial arm has effectively turned Textron into another victim of the credit crisis — a JP Morgan analyst says it has a negative value. Second, there is no chance Bell Helicopter will find itself under non-US ownership given its defense ties. 
Long story short, the emergence of Middle East investors, as opposed to earlier rumors of a potential takeover by a US defense player, should be welcomed by stakeholders. Trading under $7.50/share before the rumors began, the stock has already doubled, and could basically triple at the reported takeout price. Textron Financial will likely be absorbed by the new investors, while Bell will be sold, leaving Cessna flying high. The alternatives of muddling through, or a takeout at a lower price (as would be the case in a domestic deal), are certainly less palatable.
