Chinese Firm to Acquire Cirrus Industries
Duluth-based aircraft manufacturer Cirrus Industries, Inc., announced Monday that is has entered into an agreement to be acquired by China Aviation Industry General Aircraft Company, Ltd. (CAIGA).
Cirrus manufactures aircrafts at its facilities in Duluth and Grand Forks, North Dakota, and has sold 5,000 new piston airplanes over the last decade. Financial terms of the deal, which is expected to close in mid-2011, were not disclosed.
A Cirrus representative didn't return Monday and Tuesday phone messages seeking additional information. But the Star Tribune reported that the sale was largely motivated by Cirrus' need for cash to fund the development of its first jet for the personal aircraft market.
Brent Wouters, president and CEO of Cirrus, told the Star Tribune that discussions began with CAIGA in 2009 because stockholders of the company-which had already invested $60 million to develop the new jets-wanted to find an additional source of capital.
In addition, the Star Tribune reported that about 430 customers have put down $100,000 deposits for the personal jets, which are expected to cost about $1.7 million and could hit the market by 2014.
Cirrus has struggled in recent years, forcing it to cut its workforce at its two facilities. In 2009, the company hired back 55 employees who had been placed on furlough, which increased its employee base to about 700. At that time, a company spokesman said that the company once employed 1,300 workers before some restructuring that took place in the fall of 2008.
Wouters said in a statement that the acquisition will have a positive affect on jobs at Cirrus and the company's future growth.
“CAIGA understands the strength and the talent of Cirrus's work force and the prominence of the Cirrus brand in general aviation,” Wouters said in a statement. “Through this transaction, CAIGA will invest in our employees in both Minnesota and North Dakota by committing to the continued use of our world-class production facilities.”
Last month, the General Aviation Manufacturers Association announced that worldwide shipments of general aviation airplanes declined for the third year in a row, with total shipments down 11 percent from 2009. Cirrus shipped 264 units in 2010, down 2 percent from 2009 and down 63 percent from 2006, when shipments peaked for the company. Despite the decrease in shipments, Wouters told the Star Tribune that sales increased about $20 million to about $200 million in 2010.
CAIGA provides general aviation services, including research, development, and manufacturing of light piston aircrafts, turboprop aircrafts, jets, amphibious aircrafts, as well as parts and components. The company also provides general aviation operation services, pilot training, and aviation clubs.
Cirrus is majority owned by Arcapita, Inc., a private equity firm based in Atlanta.