The Carlyle Group and Finmeccanica Agree to Sell Avio to Cinven for €2.57 Billion

Milan, Italy – Global private equity firm The Carlyle Group today announced that, together with Finmeccanica, it has signed an agreement for the sale of Avio S.p.A., the Italian manufacturer of aircraft and naval engines and space propulsion, to funds advised by Cinven Ltd (“Cinven”). The total value of the transaction is €2.57 billion. Finmeccanica has agreed to subsequently reinvest in Avio alongside Cinven.

Carlyle and Finmeccanica jointly acquired Avio from the Fiat Group in September 2003 for €1.5 billion, with Carlyle acquiring 70% and Finmeccanica acquiring 30%. Since then, with the support and strategic guidance from its shareholders, the company has grown its revenues, through increased sales in the commercial aerospace and industrial sectors, acquired an 80% share in Dutch Aero from Royal Philips Electronics and expanded its business internationally.

“The Carlyle team has worked very closely with the Avio management over the last three years supporting the growth of the business both at national and international level,” said Marco De Benedetti, Managing Director of the Italian buyout team of The Carlyle Group. “We are very happy with the results reached: today Avio is a strong company, with growing revenues, is well-positioned in its sector and led by an outstanding management team.”

“Carlyle is fortunate to have had two outstanding partners in this investment - Finmeccanica and the management team at Avio. Avio has benefited from Finmeccanica's insights and strategic guidance in the aerospace and defense sectors as well as management's excellent judgement and execution in new programs such as the GenX engine for the 787, the Trent 900 engine for the A380 and the Vega rocket development. As a result, Avio is positioned for many years of continued growth” added Peter Clare, Managing Director and Head of the Global Aerospace & Defense Group.

Saverio Strati, CEO of Avio S.p.A. said, “We have very much appreciated the support of our shareholders over the past three years and believe Avio is now well positioned for the next phase of its growth with the support of Cinven.”

Carlyle invested in Avio through its European and US buyout funds, Carlyle Europe Partners II (CEP II) and Carlyle Partners III (CP III), which closed in 2003 and 2000 respectively at €1.8 billion and $3.9 billion. Carlyle currently has eight aerospace businesses in its global portfolio. Other aerospace investments completed by Carlyle in the past three years include the acquisitions of Standard Aero and Landmark Aviation in August 2004, Firth Rixson in March 2003, NP Aerospace in November 2005 and Stellex Aerostructures which Carlyle has recently agreed to sell to GKN. In addition, Carlyle has recently signed an agreement to invest in Wesco Aircraft.

This is the third sale from the CEP II portfolio. In September 2005 Carlyle sold its investment in Terreal, the roof tile and brick manufacturer, and in October 2005 Carlyle sold its investment in Saprogal, the manufacturer of animal nutrition products.

Financial advisers on the transaction for The Carlyle Group and Finmeccanica were JP Morgan, Lehman Brothers and Mediobanca. Legal advisers were Chiomenti, Gitti-Pavesi-Verzoni, Latham & Watkins and Pedersoli.

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