Textron executives maintain a number of decisions lie ahead with the company’s planned $1.4 billion acquisition of Beechcraft, but the initial plan would appear to maintain the brand separate of Textron’s Cessna brand and keep at least the top leadership intact at both operations.

Textron on Dec. 26 announced it would acquire Beechcraft by mid-2014, a move that would bring together two of the longest running industry rivals and most historic names in general aviation under a single owner. Beechcraft’s equity holders have approved the agreement, which is subject to the customary approvals.

Textron Chairman and CEO Scott Donnelly, who has long expressed interest in the Beechcraft programs, calls the acquisition “a tremendous opportunity to extend our general aviation business.”

The acquisition would provide Textron with a King Air twin-turboprop family that has experienced significant growth this year, along with a stable piston product line. But it also will provide a support network that when combined with Cessna’s, will be an extensive global support provider.

Perhaps most importantly, the acquisition will bring with it an installed base of close to 36,000 Hawker and Beechcraft aircraft that must be serviced.

Textron also is acquiring the type certificates for all of the former Hawker and Beechcraft business jets, including the Premier and Hawker 4000, programs that Beechcraft has been actively shopping since it shuttered the lines more than a year ago.

“From our customers’ perspective, this creates a broader selection of aircraft and a larger service footprint— all sharing the same high standards of quality and innovation,” Donnelly says. He praises the twin-turboprop King Air product line as “a fantastic global brand that fits very, very nicely” with Cessna Aircraft’s Caravan [single-turboprop] and Citation jet lines.

Beechcraft CEO Bill Boisture says, “Textron’s experience in the industry and its willingness to invest in and maintain the iconic Beechcraft brand make it an ideal parent company, one that will help us continue to satisfy our customers and meet our business objectives at a faster pace.”

Textron is assembling a transition team to help facilitate the acquisition, including the evaluation of potential synergies in the Cessna and Beechcraft businesses. Textron sees about $65 million in cost overlaps and other synergies between the companies and up to $85 million over three years.

Donnelly, however, told analysts that it was too early to say where the synergies would come from and added that much work remains ahead in terms of folding the Wichita airframer into the company’s operations. Textron, however, did point to potential overheads and marketing costs as areas of potential savings, along with manufacturing.

From a financial reporting standpoint, Cessna and Beechcraft likely would be combined under a single structure, says Textron spokesman David Sylvestre. But from a marketing and operational standpoint, Cessna and Beechcraft likely will remain separate with their own identities, Slyvestre says. He also says that, at this point, he does not see changes in the current top leadership of Cessna and Beechcraft, noting that both are such large operations they need strong leadership in place of each.

Donnelly also told analysts he does not believe facilities or other asset sales will be a significant, if any, contributor to cost savings, noting Beechcraft has already downsized and restructured significantly in recent years.

Tough Years

Donnelly was cognizant the Beechcraft workforce has “been through a really tough number of years,” particularly with the recent bankruptcy process. “There’s been a lot of cost restructuring. [It has] created a lot of uncertainty.”

Textron and Beechcraft have already moved to work with the employee bases at both Cessna and Beechcraft, issuing internal communications, Sylvestre says, adding that the International Association of Machinists and Aerospace Workers (IAM) was informed of the deal almost immediately.

But that does not mean the companies are ruling out layoffs, company executives caution. That will be part of the decisions made as the transition team reviews the operations.

Asked whether he sees potential for selling or closing competing service centers at the same location, Donnelly says that would only depend on whether one was underutilized. If they were fully operating, he would expect little change in their operations. Those are decisions that will be reviewed by the transition team, Sylvestre says.

While the acquisition includes all the jet lines, Textron has no intention of bringing them back into production, Sylvestre says. In fact, Donnelly notes that, with the Hawker jet lines closed, it provides an opportunity for existing Beechcraft customers to move into Cessna’s Citation aircraft.

Donnelly also had noted that shutting down the jet lines eliminated a “big drag” on the research and development expenses for Beechcraft, adding “a lot of that cost has come out of the business.” But he also reinforced that product development would continue, with ongoing upgrades underway for the King Airs.

The agreement comes a little more than 10 months after Beechcraft emerged from Chapter 11 bankruptcy protection as a standalone company owned by its former debt holders. Beechcraft, which had labored under a mountain of debt after Goldman Sachs and Onex bought the company from Raytheon for $3.3 billion in 2007, entered Chapter 11 in May 2012. The prearranged restructuring plan called for its debt holders to take ownership of the company in exchange for the elimination of $2.4 billion in debt.

Other Options

While the plan was in place, the investors and executives agreed to consider other options, leading to a potential sale to Chinese firm Superior Aviation Beijing. When that deal collapsed in October 2012, Beechcraft opted to continue under the original reorganization plan, and emerged in February as a standalone, smaller company, shed of 85% of its former debt.

But its new owners included investors that primarily specialized in buying distressed companies. Boisture had told Aviation Week last summer that if asked whether they would be long-term owners, “I wouldn’t think so.”

Since emerging from bankruptcy, Beechcraft has worked to stabilize the firm, reestablish its supply chain and repair any damaged customer relations. The company had already shut down the costly jet lines, opting to keep the Hawker 800/900 and Beechjet/Hawker 400 type certificates for the lucrative services business, but to sell the Premier and Hawker 4000 programs. Beechcraft originally was looking at a separate buyer for the aircraft lines, but those programs got folded in as talks with Textron progressed.

Since emerging from bankruptcy, Beechcraft has remained profitable, even at lower margins. Revenues are expected to reach $1.8 billion this year, and deliveries have increased 47% through the first three quarters. The company also notes it has seen its highest booking rates in the past three years.

Donnelly credits the strength of the brand to this improved performance and says Textron plans to work to assure the customer base that it will support all of the brands going forward.

Closing of the deal could take up to six months. Textron plans to finance it through a combination of available cash and up to $1.1 billion in new debt involving a five-year loan. The agreement includes a $48 million termination fee should Textron back out of the deal.

News of such an acquisition had initially drawn favorable reaction from analysts. J.P.Morgan had called the purchase a good fit for Textron, and said while “we would expect bumps along the way...there is still more upside if this all works out.” As far as achieving the cost savings, J.P. Morgan notes, “there would be a lot of wood to chop to integrate the company.”