Wipro Aerospace’s US unit has bid to acquire the assets of Boeing supplier TECT Aerospace Group Holdings for $31 million, documents filed with a US bankruptcy court showed. The bid, if successful, will help Wipro Aerospace bag more orders to supply systems and components for the Boeing 737 aircraft programme.
Wipro Givon has been selected as a “stalking horse” bidder by debtors for the auction of TECT’s assets in Everett, Washington, according to the document filed in the United States Bankruptcy Court, District of Delaware. A stalking-horse bid is an initial bid on the assets of a bankrupt company.
Wipro Givon and Boeing have entered into a separate agreement for the deal. Boeing’s participation is being viewed as a move to protect its own manufacturing interests.
Wipro Aerospace is a unit of Wipro Infrastructure Engineering (WIN), whose parent is Wipro Enterprise, the privately held business of billionaire Azim Premji. WIN acquired Israel-based Givon in 2016.
TECT Aerospace filed for Chapter 11 bankruptcy in April after it was hit by a stoppage in production of Boeing 737 Max aeroplanes in December 2019 and due to restrictions on air travel in the wake of Covid-19 pandemic.
In 2019, production of components for the Boeing 737 Max accounted for 35% of TECT’s total revenue. In the following year, the aerospace giant accounted for a majority of TECT’s revenues.
“As a result of pre- and post-petition efforts, the Debtors were able to reach agreement on a stalking horse asset purchase agreement for the Assets with Wipro Givon USA, Inc,” the filing read.
A stalking horse bidder sets the lowest price bar for the auction process so that other bidders cannot underbid.
“Pursuant to the Stalking Horse Agreement, and subject to higher or better offers through the bidding and auction process, the Stalking Horse Bidder has agreed to purchase the Assets for $31,073,933 in cash plus the assumption of certain liabilities…,” according to the filing.
The deadline to receive bids from others is June 10, following which an auction would be held, if necessary, on June 14. After this, the debtors will file with the court the notice of auction results.
If all goes according to plan, the sale could be closed before the end of June, according to the court documents.
A spokesperson for Wipro Enterprise said the company does not comment on specific deals. Boeing does not have any comment to offer at this stage, a spokesperson said. Rick Rosenjack, president of TECT Aerospace, did not respond to an email seeking comment till press time Sunday.
As part of its stalking horse agreement, Wipro Givon will absorb all the employees at TECT Aerospace’s Everett facility. Wipro Givon USA currently has 38 employees located at the plant.
TECT Aerospace’s bankruptcy filing does not include the company’s assets in Wichita, Kansas. The sale of these assets will be done separately by the debtors.
The court documents revealed that TECT Aerospace owed lenders approximately $42 million, comprising a revolving loan facility and two term loans.
In February, Boeing bought out the loans from PNC Bank under the Prepetition Credit Agreement and became the agent and sole lender under the agreement.
“Based on discussions with Boeing and its importance to the Everett business, the Debtors desired to find a potential third party purchaser that would be able to offer a long-term supply relationship for Boeing, thereby maximizing the value of the Assets,” the court filing says.
Wipro Givon USA and WIN do business with Boeing, the filings said.
Wipro Givon USA is also a supplier to Lockheed Martin’s F-35 multirole stealth aircraft, which has run into trouble with US lawmakers over cost escalations.
Earlier this year, the chairmen of two US House committees warned that they might cut purchases of the aircraft in FY22.
Components manufactured for the F-35 account for 75% of Wipro Givon USA’s revenues, said Bob VonBargen, general manager at the company in an opinion piece for the Daily Herald recently.