Shares of Textron Inc. (TXT) jumped as much as 58% in intra-day trading on Thursday after Kuwait's Al-Watan newspaper reported that a group of United Arab Emirates companies and a Kuwaiti firm are close to securing a deal to buy the maker of Cessna aircraft and Bell helicopters for $21 per share.

Without identifying the sources from where it got the information, the Kuwaiti newspaper said the buyers are interested in the civil operations of Textron and will sell its defense operations to an American company involved in the negotiations. The report, which didn't reveals the names of the consortium members or the U.S. company, also said there was an assumption the agreement would be reached on a U.S. public holiday.

The report came in a week when Textron shares have rallied amid speculation that the company would be bought by defense contractor Lockheed Martin Corp. (LMT) or smaller rival Raytheon Co. (RAY).

The global recession has cut into Textron's businesses. The Providence, Rhode Island-based company's financial division has made huge losses, being heavily exposed to mortgage-backed securities, while its largest subsidiary Cessna Aircraft Co. scrambled to cut production as new orders for business jets have plummeted. Of course, the company's Bell helicopters unit has a solid defense order backlog that is unaffected by the economy.

Textron said last week that it plans to further cut 2009 manufacturing production rates at its Cessna aircraft unit as well as its industrial business unit, which produces EZ-GO golf carts.

The company said Monday it has completed the sale of HR Textron to Woodward Governor Co. (WGOV), and is expected to generate about $265 million in after-tax cash proceeds, although it is expected to reduce its 2009 earnings by about $0.05 per share. Textron expects to end the first quarter with over $1.0 billion in cash.

Textron said in February that it has drawn $3 billion in credit to pay off debt and boost liquidity as it exits nearly all of its commercial financial business. In addition, the company slashed its quarterly dividend by 91% in a bid to conserve cash.

In December, Textron announced its decision to exit nearly all of its commercial finance business, other than that portion of the business supporting the financing of customer purchases of Textron-manufactured products.

It may be extremely difficult for Textron to sell itself to foreign buyers in entirety because its business lines comprise of civil aviation and military defense. Sales of U.S. companies with defense or national security components have become a thorny political issue in the U.S. in recent years.

Buying Textron's civil aviation businesses makes sense for the consortium of Middle Eastern companies as the region is an important growth market for business jets where the Cessna brand is well known.

Textron shares have fallen from a 52-week high of $65.52 on May 30 to hit a 52-week low of $3.57 on March 6. The stock hasn't closed above $10 since January 28, a day before the shares tumbled the most in two decades after the company forecast full year 2009 earnings well below analyst estimates. The company reports first quarter results April 29.

Textron shares are currently trading at $13.66, up $4.55 or 49.95%.

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