General Dynamics (NYSE: GD) announced today that it has reached an agreement to acquire Galaxy Aerospace Company, LP, for $330 million in cash. In addition, the selling parties may receive additional payments - up to a maximum of $315 million - through 2006 contingent upon the achievement of specific revenue targets. Galaxy Aerospace is a joint venture, formed in 1997, of the Hyatt Corporation and Israel Aircraft Industries Ltd.; it anticipates 2002 revenues of $635 million and operating income of $72 million.
Galaxy is headquartered at Alliance Airport in Fort Worth, Texas; it has approximately 450 employees. When the transaction closes, Galaxy will become part of General Dynamics' Aerospace group, which includes Gulfstream Aerospace. The companies expect to close the deal next month.
In the transaction, General Dynamics will acquire two new product lines for its Aerospace group: the Astra mid-size twin turbofan business jet, and the Galaxy, the first aircraft in the super mid-size class, which began flying in January 2000, well ahead of its competitors. The Galaxy has the longest range and largest cabin volume in the super mid-size aircraft category. General Dynamics will continue Galaxy Aerospace's relationship with Israel Aircraft Industries. In this arrangement, both aircraft models will be assembled by Israel Aircraft Industries in Tel Aviv, Israel, and flown to Fort Worth in a "green" configuration; General Dynamics will design and install custom interiors and all optional equipment.
Concurrent with the transaction, Executive Jet Inc., a Berkshire Hathaway company, has placed an order for 50 of the super mid-size Galaxy aircraft to be delivered over the next five years, with options for 50 more for its NetJets(R) fractional aircraft ownership program. Total value of the order, options and maintenance services is approximately $2 billion.
At the end of the first quarter of 2001, total backlog for General Dynamics Aerospace Group was $4.7 billion.
"This acquisition gives General Dynamics an immediate presence in the super mid-size and mid-size market -- the fastest growing segment of the business aircraft market," said Nicholas D. Chabraja, General Dynamics chairman and CEO. "The Galaxy and Astra SPX aircraft are superb products, complementing Gulfstream's GIV-SP, GV, and the new GV-SP. With a larger family of aircraft, we will attract and retain a broader range of customers, providing them with entry, move-up, and add-on opportunities. It greatly expands our competitive position -- without the expense and time of product development -- and improves our already strong position in the fractional ownership market as a result of our strong relationship with Executive Jet and its NetJets(R) fractional aircraft ownership program.
"In addition," Chabraja noted, "the acquisition also increases our revenue base for service, parts, and refurbishment since Galaxy supports a worldwide fleet of more than 400 business jets, including business jets previously built by Israel Aircraft Industries, such as the Westwind series."
Chabraja will meet with financial analysts and investors to discuss the acquisition on May 1 at the New York Palace Hotel.
Published by Israel's Business Arena on May 1, 2001.