Print edition: 
Cessna Aircraft’s parent company, Textron, has undertaken a strategic review of the company that could include the option of spinning off some of its business, sources have told Reuters.
Sources did not expect the study to bring changes to Textron’s strategy in the near term, Reuters said in a report Wednesday.
Textron spokesman Dave Sylvestre declined comment to The Eagle about the Reuters report.
About a month ago, Reuters said, activist investor Ralph Whitworth’s Relational Investors examined Textron as a potential target to advocate for a strategy change. But the source was not aware whether Relational Investors had bought a stake in the company, it said.
Textron, with a market value of about $5.6 billion, has not hired any bankers, although it has a longstanding relationship with Goldman Sachs.
The last four years has been volatile for Textron. Cessna cut 50 percent of its workforce — about 6,000 people in Wichita — during the economic downturn as orders slowed and cancellations piled up. Textron shares have lost more than 70 percent of their value in the past few years.
Besides Cessna, Textron operates Bell Helicopter, Textron Systems, Textron Financial, Kautex, Jacobsen, Greenlee and E-Z-Go divisions.
Textron chief executive Scott Donnelly has worked to turn the company around. Cessna, for example, has made major changes in its executive staff, including a change of CEOs.
Donnelly told The Eagle in 2009 that he wasn’t interested in selling Cessna.
"I think I can be clear that no one is interested in any way, shape or form in divesting Cessna out of Textron,” he said then. “It’s a central asset of what Textron is."
Textron’s review comes as U.S. diversified industrial conglomerates come under increasing pressure to break up into units, often from activist investor pressure, Reuters said. Last year, Relational Investors pressured ITT Corp. to split up and urged L-3 Communications to divest assets, the Reuters report said.
Activists say that defense operations drag down the market value of their other business lines in a conglomerate, said Loren Thompson, Lexington Institute defense analyst. And Pentagon contracts are expected to whither in the coming years.
Because its stock has underperformed the S&P 500 Index, management must respond to the activist even if it thinks divestitures are a bad idea, Thompson said.
Textron is an important niche player in the defense industry with the V-22 Osprey rotorcraft, the unmanned aircraft the Shadow and smart munitions such as the Sensor Fuzed Weapon, he said.
“Many of its military products are genuinely unique, which means the defense department needs to assure their future availability will not be impaired by changes in the character of the enterprise,” Thompson said.
“Textron’s defense programs would not simply go away in any breakup or divestiture scenario because they generate billions of dollars in revenue annually for the company.”
But the financial and management structure Textron operates could go away. Without the resources of such a large conglomerate behind them, managers of weapons programs may be more constrained in the risks they take and the investments they make.
“That would be especially true if the operations were acquired by private equity, which often tries to drain cash from properties before flipping them to the next owner,” Thompson said.
