KKR sells aerospace parts firm Novaria Group to Arcline for $2.2 billion

By Isla Binnie and Sabrina Valle

NEW YORK (Reuters) -KKR has struck a deal to sell aerospace and defense hardware maker Novaria Group to industrials-focused private equity firm ​Arcline Investment Management for $2.2 billion, the company and the seller told Reuters on Monday.

KKR ‌took control of Fort Worth, Texas-based Novaria in early 2020, and since then the group has added 13 new companies, ‌KKR partner Joshua Weisenbeck told Reuters.

The firm is selling Novaria against a supportive backdrop for deals in aerospace and defense, buoyed by forecasts for growth in aircraft production as the sector recovers from the COVID-19 pandemic, the removal of a production cap on planemaker Boeing, and increased spending on national security, Weisenbeck said.

Novaria's companies ⁠provide parts and processes for aircraft as ‌well as drones and submersibles.

"You've seen reinvestment in the defense supply chain globally and in certain cases the percentage of GDP spent on defense growing," ‍Weisenbeck said. The war in Ukraine and doubts about the U.S. commitment to NATO have pushed up military spending around the world.

Arcline declined to comment.

Novaria Group CEO Bryan Perkins said the transaction represented "the success of our long-​standing partnership with KKR and the dedication of the Novaria team."

Many private equity firms have been struggling to ‌profitably sell companies they bought during a long period of lower interest rates, slowing returns of capital to investors.

The number of exit deals - where private equity and venture capital firms cash out on their investments through a public listing, selling to another investor, or rolling an asset into a new vehicle - rose in the third quarter from the second, according to data provider S&P Global Market Intelligence,⁠ but the total value of those deals was much lower ​than in the previous three months.

KKR executives played down concerns ​about private markets' fundraising and deals last week as they reported quarterly earnings that showed rising performance income from the private equity business.

The Novaria deal is an example of a revival ‍of transactions between private equity ⁠firms, Weisenbeck said. "We're seeing a reopening of the sponsor-to-sponsor M&A trade."

KKR offers equity to rank-and-file employees in its portfolio companies, meaning Novaria'⁠s employees will get cash when the deal closes. The company says the program has led to higher revenue, improved productivity ‌and lower turnover at its portfolio companies.

(Reporting by Isla Binnie and Sabrina Valle in ‌New York; Editing by David French and Kate Mayberry)

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