Aviation services and materials group BBA has finally forsaken its engineering roots with the sale of its automotive friction materials division to HSBC Private Equity for £389m.
The sale will enable BBA to concentrate on its two remaining divisions, aviation services and non-woven materials and could allow the friction business to become a global leader. Mark Dunfoy, a director of HSBC Private Equity, said the division – which makes brake pads – was European market leader, with good aftermarket sales providing inherent stability.
`We are going into a stable business. It is not overly prone to recession, given the aftermarket sales for brake pads, which obviously wear out and have to be replaced,’ he said.
Dunfoy said HSBC could either sell the business or prepare it for stock market flotation.
The $10bn (£6.7bn) global friction materials industry could provide ample opportunity for acquisitions, and a number of competitors may come up for sale within the next few years.
`We have a 25% share of the European brake pads market, a very small percentage of the US and Far Eastern markets, and no presence at all in the US aftermarket. There are, therefore, opportunities in the US and Far East to turn the division from a £300m business to a £1bnbusiness over the medium term, at which stage we could float it,’ Dunfoy said.
The division employs more than 3,600 people, and made £41.2m profit last year. BBA has invested over £100m in new product and process technology in the last five years, to automate the materials mixing process. These new processes have been introduced at its plants throughout Europe, putting it ahead of the market in terms of technology and cost, according to Dunfoy.
BBA chief executive Roberto Quarta said that the latest sell-off completed the company’s six-year transition from a diversified industrial and engineering conglomerate to an aviation services and materials technology group. A reclassification for BBA from the FTSE engineering and machinery sector to the support services sector may follow.
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