Cessna has taken the next step toward its acquisition of Columbia Aircraft Manufacturing Corp. of Bend, Ore.
On Oct. 23, officials at the bankrupt Columbia revealed that shareholders had entered into an Asset Purchase Agreement with Cessna. The terms of the agreement are consistent with the Sept. 21, 2007, Letter of Intent between the companies, they added.
According to Columbia spokesman Randy Bolinger, the agreement solidifies the Letter of Intent by spelling out Cessna’s minimum bid for the company, as well as what means it would use to address issues such as warranty coverage and product support.
The agreement basically sets the standard for other parties wishing to bid for Columbia’s assets. The U.S. Bankruptcy Court in Portland, Ore., has set Nov. 27 as the date of the auction.
“The other suitors will have to meet those minimum standards,” said Bolinger.
As this issue was going to press, there were five prospective bidders for the Columbia assets: Cessna, Granger Whitelaw, president and CEO of the Rocket Racing League, Versa Capital Management, Park Electrochemical and Cirrus Design Corp.
On. Oct. 11, Cirrus, which is Cessna’s closest competitor in the single-engine piston market, filed a motion with the U.S. Bankruptcy Court, expressing interest in acquiring Columbia. Both companies manufacture low-wing composite aircraft.
“Naturally Cirrus would express interest, given some of the similar advanced technologies in the Columbia line and how the line could complement the current Cirrus SR line,” said Alan Klapmeier, Cirrus co-founder and CEO. “Cirrus has the ability to expand [Columbia’s] business and at the same time further enhance the value of our business. Obviously, we also have the capabilities to take great care of the customers.”
Cirrus’s motion alleged that the bidding process unfairly favors Cessna. The court did not agree.
In an earlier interview, Cessna CEO Jack Pelton indicated that Cessna officials entered into discussions with their counterparts at Columbia in April 2006, but could not sign a letter of intent until Columbia was on the brink of bankruptcy. In September 2007 Columbia filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Under Chapter 11, a company’s reorganization plan must be accepted by a majority of its creditors. Unless the court rules otherwise, a Chapter 11 debtor remains in control of the business and its assets during reorganization. The Malaysian government has owned a controlling interest in Columbia since 2002.
According to the U.S. Bankruptcy Court filing, Columbia lists approximately $60 million in unsecured debt owed to thousands of creditors.
In the meantime, Columbia announced that it delivered 30 new Columbia 350 and 400 aircraft in the third quarter of 2007. Although the delivery number is slightly behind projections for the quarter, it exceeded third quarter deliveries in 2006, officials noted.