Strategic Chinese acquisition in European dual-use aviation technology: the case of Mistral Engines

In 2014 Guangdong Yilipu Electric (known as Elecpro) acquired 85.6% of the shares of Swiss company Mistral Engines SA (MESA) for 21,9 million rmb (approximately 2,5 million euro). They also acquired the technical assets and prototypes of the German SkyTRAC/SkyRIDER coaxial twin-rotor helicopter project for another 2,5 million euro.

In preparation for these deals Elecpro incorporated AeroSteyr Rotary Sàrl in Switzerland and Elecpro International Investment Holdings Company Limited in Hong Kong. Elecpro used to be solely focussed on the production and sale of ricecookers, water boilers and other small household appliances. In 2013 they set out a strategy to expand their business to the aviation industry. They bought their sister company Deao Helicopter Co from their parent company Beijing Wutong Xiangyu Investment Co. In June 2015 Guangdong Yilipu Electric (Elecpro) changed its name to DEA General Aviation, and officially expanded its business scope from household appliances to aviation.

Aircraft engine technology

Mistral Engines develops and manufactures engines for light aircraft, helicopters and unmanned military vehicles. It has wholly-owned subsidiaries in the United States and France. By acquiring the Swiss and German technology, DEA General Aviation not only inherited the historical evolution of the product’s airworthiness certification in European and America, but also direct ownership of core technical assets of coaxial twin-rotor helicopters and aero engines.

Since unmanned aerial vehicles (drones) is dual-use technology, meaning it has civilian as well as military applications, this part of the company was supposed to be separated from the acquisition, due to national concern. However, given the civil purpose uses of the same engine, it went through with non-military aims.

DEA General Aviation is listed on the Shenzhen stock exchange. The majority of the shares are publicly traded. The largest shareholder is Beijing Wutong Xiangyu Investment Co (24,66%). This investment company is ultimately owned by several private persons. The other shareholders can all be traced back to private persons as well. There are no government related investment funds as shareholders in the company. DEA General aviation is the sole owner of Deao Helicopter Co.

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Cooperation and further acquisitions

Deao Helicopter Co (a subsidiary of DEA General Aviation) is the agent of Schiebel’s S-100 UAV in China. They are responsible for sales and after-sales service, as well as spare parts supply and special purpose modification. The unmanned drone has a wide range of applications, including resource surveys, traffic safety, fire warning, long-distance line inspections, communication relays, environmental monitoring, border patrols, disaster relief, anti-terrorism and anti-riot, anti-narcotics and other military and civilian applications.

In 2015 DEA General Aviation used its German subsidiary Rotor Schmiede GmbH to acquire XtremeAir for 3.6 million euros. They produce EASA certified full-carbon aerobatic and sport aircrafts and provide technology for fixed-wing aircrafts. In 2016  DEA General Aviation used another German subsidiary (AeroSteyr Engines GmbH) to acquire Hirth GmbH, a UAV propulsion specialist offering 2 to 4-stroke engines for UAV and ultralight applications for 4.5 million euros.

The aviation sector has been a strategic sector for technology acquisitions. Already in 2009 China’s state-owned AVIC (Aviation Industry Corporation of China) acquired Austria’s Fischer Advanced Composite Components and in 2013 they acquired Germany’s Thielert Aircraft Engines.