China’s ambitions to fast-track the development of its aerospace industry continued to be a key driver of merger and acquisitions (M&A) activity during the second quarter, according to financial advising group PricewaterhouseCoopers (PwC). In a report last week, the group contrasted high levels of M&A activity in the civil aerospace sector with a defense sector where deal-making has slowed in the wake of the U.S. federal government cuts to military spending and the uncertainty prompted by the budget sequestration.
So far this year there have been 17 civil aerospace M&A deals each worth more than $50 million, with a total value of $4.2 billion, compared with just four defense deals totaling $1.3 billion, according to PwC. The total value of M&A deals during the second quarter reached $4.1 billion, compared with $1.9 billion in the first quarter. This included one unspecified “mega-deal” involving a Chinese company and worth $1.5 billion alone.
In the first half of the year, there were 11 U.S. deals worth more than $50 million each with a total value of $2.5 billion. Over the same period, there were six deals in the Asia and Oceania region worth $2.6 billion collectively and with China accounting for $1.8 billion of the total. “China is continuing to increase funding for engine R&D and reduce dependence on foreign engine technology by prioritizing domestic development,” said PwC’s U.S. aerospace and defense leader Scott Thompson. “This engine R&D consolidation is leading to an increase in Chinese deal activity as the nation is trying to move ahead domestically in the sector.”
PwC’s report of continued strong M&A activity among Chinese aerospace firms comes amid fresh reports of possible new delays for China’s flagship aerospace program, the Comac C919 airliner. According to a report by Bloomberg based on input from company officials, Comac intends once again to push back the planned first flight of the new narrowbody, this time from 2014 to 2015. Government-backed Comac did not respond to a request from AIN for confirmation of the reports.
According to Bloomberg, which also cited information released through the state-owned China News Service, Comac has indicated that the latest program delay is not linked to “technical matters” and that it intends to inform key Western program partners this month.