BOSTON (Reuters) -- Raytheon Co. has stepped up its efforts to sell its struggling aircraft business, but industry sources say potential buyers are wary of the price tag and past problems.
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Lexington, Massachusetts-based Raytheon made a formal overture to potential buyers in September when it set a deadline for non-binding bids, according to industry sources. An investment bank retained by Raytheon has given prospective buyers a book on the business so they could evaluate the aircraft unit's operations.
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Raytheon spokesman David Polk declined comment.
Earlier this year, Raytheon was quietly shopping the Wichita, Kansas aircraft unit and floated a price tag of about $4 billion for the business. But with no solid offers in that ballpark, Raytheon lowered its expectations for the unit, which has been hurt by pricing pressure, rising production costs and the delayed launch of its Premier business jet.
The aircraft unit generated 1999 sales of $2.7 billion, but its operating income dropped nearly 29 percent from the previous year.
Industry analysts said France's Dassault Aviation SA, maker of the Falcon business jet,
Textron Inc. [TXT], which owns Kansas-based Cessna Aircraft and Canada's Bombardier Inc., which owns jet-maker Lear, are considered potential buyers.
General Dynamics Corp. [GD], owner of Gulfstream, isn't a likely buyer, however, because it occupies the high-end of the business jet market. Raytheon sells less expensive Beech and Hawker jets, for example.
Raytheon, the maker of Patriot missiles and radar, is under pressure from Wall Street to focus on its defense electronics business and unload non-core assets to pay down a debt load of about $10 billion.
After issuing a series of profit warnings last year, Raytheon executives called on managers to concentrate on generating cash flow from their programs. During the second quarter, the aircraft unit's operating income dropped to $35 million on sales of $810 million, compared with operating income of $69 million on sales of $742 million in the year-ago period.
The fastest growing segment of the aircraft unit is Raytheon Travel Air, which generated $230 million in sales during 1999 selling fractional ownership in Raytheon business jets. While this business grew in excess of 75 percent last year, there's a risk fractional owners will lose their enthusiasm for owning part of an airplane if the economy tightens.
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