Textron shares jump as takeover speculation swirls

The company's stock gained $4.45 to close at $13.56, posting its biggest gain in 28 years, on about four times the typical daily volume. Shares are still down about 80 percent from their trading range a year ago.

"It's our policy not to comment on market rumors," said Karen Gordon, a Textron spokeswoman, in an e-mail.

Kuwait's Al-Watan newspaper said a group from the United Arab Emirates was preparing to buy Textron for $21 a share, or more than twice its closing price Wednesday. The newspaper did not name any sources.

Still, the investment community was buzzing over complications that would arise if a foreign investor group tried to buy Textron, which derives 15 percent of its revenue from defense contracting and also makes military helicopters. The consensus is that Textron would be split up, with the sensitive defense businesses sold to US buyers. The key prize the purported Mideast investors appear to be after is the Cessna Aircraft Co. unit in Wichita, Kan., that makes corporate jets and utility aircraft.

"A take-out here would not be shocking," said JP Morgan analyst C. Stephen Tusa Jr. in a note to clients. He said the company faces financial challenges and management has lost credibility.

The firm's chief financial officer recently left, and Textron said it would get out of the finance business except to service customers that buy its products. Chief executive Lewis Campbell recently said the company needs an additional $1 billion in liquid assets before it will be "out of the woods."

Tusa said he believes the company's manufacturing units, valued individually, are worth about $12 a share. Meantime, Textron has a foundering finance unit with a negative value. Tusa said, "$21 a share looks expensive."

Textron is a classic conglomerate, a collection of unrelated businesses that seemingly do not benefit from being under one corporate umbrella. Such a business model is not currently in favor on Wall Street. Most recently, the Tyco International conglomerate run by L. Dennis Kozlowski was largely dismantled after Kozlowski quit in 2002. He was later convicted of looting the company of millions of dollars.

Besides Cessna and its defense businesses, Textron includes Bell Helicopters and a number of unrelated companies, including E-Z-GO golf carts, Greenlee - which makes systems and tools to install electronic cables - Jacobsen lawnmowers, and Kautex and CWC, which make auto parts.

In a letter to clients, Citi Investment Research analyst Jeffrey T. Sprague said breaking up Textron would benefit shareholders.

"This type of scenario would likely solve one of the key problems in realizing Textron's full value, namely that Textron has many pieces which would fit well with other companies, but all of Textron does not fit well with any one company," wrote Sprague. "Clearly the US government would not let (Bell Helicopters or the defense systems business) fall into foreign hands."

Raytheon Co. of Waltham is seen as a potential buyer of Textron's weapons business. Those units make unmanned drone aircraft for the Army, combat vehicles for land and sea, rockets and missiles, surveillance systems, and tools for using photos for spy purposes.

In January, Textron reported 2008 revenue of $14.2 billion and earnings per share of $1.95, down 46 percent from the previous year.

Bryan Bender of the Globe staff contributed to this report. Jeffrey Krasner can be reached at krasner@globe.com.