Teledyne Continental Motors Set to be Acquired by AVIC

Yes, I know. This is somewhat old news, but I only just learned about it yesterday. It seems that Teledyne Technologies Incorporated (NYSE: TDY) has agreed to sell its subsidiary Teledyne Continental Motors to AVIC International Holding Corporation, a large Chinese company that has been given charge of designing and manufacturing Chinese commercial aircraft.

TCM is one of two major manufacturers of aircraft piston engines in the US (the other is Lycoming, a subsidiary of Textron). As such, the company has about half of the market share for piston engines in aircraft in the US, and roughly the same market share for general aviation aircraft around the world. TCM employs about 400 workers in Mobile, Alabama, where the company is based.

At first glance, this seems like another bunch of jobs that are being swept off to China. However, AVIC appears to be interested in keeping TCM’s production facility in Mobile, and actually increasing the number of workers as demand for piston aircraft is expected to increase throughout the world, but especially in China.

So it would seem that this is actually a win-win situation for both TCM and AVIC. AVIC gains access to a well-known, well-respected piston engine manufacturer, and TCM gains access to not only a well-known, well-respected supplier for aviation companies around the world, but also a potentially huge market for piston engines in China. There are currently fewer than 1,000 general aviation aircraft operating in China and, as the aviation regulations in China are gradually loosened, that number could see explosive growth in the next ten years.

The sale is expected to go through in the first quarter of 2011, after receiving anti-trust clearance and approvals from both the US and Chinese governments. Since TCM is not involved in any defense-related manufacturing or technology, there should not be any objections to prevent the sale from being completed.

Teledyne has an interesting PDF document detailing the benefits of the sale, and it is well worth reading.

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