Carlyle, Dubai Aerospace Deal May Clear Congressional Hurdles

Dubai's planned purchase of two aircraft engine repair companies won't raise the same national security concerns in Congress as the acquisition of several U.S. ports last year by a company based in the emirate, said Senator Charles Schumer, a leading critic of the ports deal.

State-owned Dubai Aerospace Enterprise is in discussions to buy Landmark Aviation and Standard Aero Holdings Inc. from Carlyle Group, a Washington, D.C.-based private equity firm, for more than $1.5 billion, people familiar with the talks said.

``This purchase is not as much of a security risk as Dubai Ports World,'' Schumer, a New York Democrat, said in a statement, referring to the company which bought the U.S. ports. With proper security reviews, ``the deal is unlikely to have problems in Congress.''

Dubai Aerospace, a company formed last year, would buy and then sell Landmark's 33 business aircraft terminals in the U.S. and Canada, the people said. State-owned Dubai Aerospace, based in Dubai, United Arab Emirates, would keep the company's aircraft maintenance operations. Standard Aero has no terminals, only repair facilities.

Dubai Aerospace would seal off the Landmark unit in a trust and bring in outside managers to auction off the business, the people said. While the remaining aviation maintenance units do have U.S. defense contracts, none involves classified work, and employees are subject to security screening, they said.

Landmark, Standard Aero

Tempe, Arizona-based Landmark repairs Boeing Co. and General Dynamics Corp.'s Gulfstream business jets among others. It calls itself one of North America's largest providers of services for the business aviation industry and has repair facilities at 19 U.S. locations.

Winnipeg, Manitoba-based Standard Aero repairs military and business aircraft for 1,400 business and commercial airplane customers, the biggest of which are Lockheed Martin Corp. and Rolls Royce Group PLC.

The transaction is subject to review by the Committee on Foreign Investment in the United States, a panel headed by Treasury Secretary Henry Paulson that's assigned to make sure foreign investment doesn't compromise national security.

``The devil is in the details, and a full CFIUS investigation at the highest levels of government is the only way to assure our national security,'' said House Homeland Security Committee Chairman Bennie G. Thompson, a Mississippi Democrat.

Treasury

Brookly McLaughlin, a Treasury spokeswoman, declined to comment on the transaction, citing the department's policy of refusing to confirm or deny that transactions are under review.

``CFIUS has a rigorous and comprehensive process for reviewing foreign investments that raise national security concerns,'' she said in Guatemala City, where Paulson was attending a meeting of the Inter-American Development Bank.

The acquisition last year by DP World, a Dubai state-owned company, of terminal operations at six major U.S. ports, set off a furor among Schumer and other lawmakers, who said the deal compromised national security. While Congress has no formal role in reviewing specific foreign investments, it can apply political pressure.

DP World ended up selling the port facilities to AIG Global Investment Group, fulfilling a promise to lawmakers to divest itself of the U.S. operations.

Lieberman

Dubai Aerospace is taking steps to prevent similar objections to its plans, contacting members of Congress including Schumer and Senator Joseph Lieberman, a Connecticut independent who heads the Senate Homeland Security and Governmental Affairs Committee, the people said.

Lieberman said he would withhold judgment on the proposed acquisition.

``The CFIUS process should be allowed to run its proper course,'' he said in a statement.

Dubai and Carlyle haven't yet filed an official request for review with the U.S. security committee, the people said. The companies have already told members of the panel that they expect a full investigation.

Dubai and Carlyle also have briefed officials at the White House, the Pentagon, the Department of Homeland Security and other agencies that compose the Committee on Foreign Investment in the United States, the people said.

Landmark's customers include Honeywell International Inc., the world's biggest maker of airplane controls, and Airbus SAS, maker of the largest passenger plane ever built.

U.S. Conditions

Dubai officials said they're prepared to accept a condition the U.S. imposed on Alcatel SA when it acquired Lucent Technologies Inc. in November, according to the people. Paris- based Alcatel was forced to agree that the U.S. may reopen its review of the transaction and potentially compel the French company to divest if senior U.S. officials decide it has failed to abide by security safeguards.

Dubai Aerospace is controlled by the government of Dubai through investment funds including Istithmar PJSC, Dubai International Capital LLC, Amlak Finance PJSC and Emaar Properties PJSC, the Middle East's biggest real-estate developer, the people said. Dubai is already in negotiations with U.S. and international lenders to procure financing for the acquisition from Carlyle, they said.

source:www.bloomberg.com