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By Tim Hepher, Eric M. Johnson and David Shepardson
(Reuters) - Boeing Co said on Thursday it plans to spin off its venture capital arm, HorizonX, to forge a broader external investment fund, in a deal said by sources to value the unit at several hundred million dollars.
Under the deal, AE Industrial Partners (AEI), a specialist private equity firm, will add fresh capital to the portfolio born out of Boeing's decision to set up its own venture fund in 2017.
"The partnership with AEI and future partners broadens our investor base, enables HorizonX to invest at a rapid pace and gives Boeing access to more outside innovation than ever through this investment collaboration,” Boeing Chief Strategy Officer Marc Allen said in a statement.
The move accelerates efforts by Boeing to deepen the pipeline of technology available to the U.S. aerospace giant, and will ease the burden of supporting future growth of HorizonX, which has invested in more than a dozen companies.
HorizonX "needs to go faster and needs a bigger capital pile to invest in more companies," a person familiar with the deal said.
Boeing will remain a strategic investor with a "significant majority" stake in the initial fund to be created from the spinoff, which is expected to be named AE HorizonX, the person said.
It will continue to hold smaller stakes in any follow-on funds bringing in more entrepreneurial capital.
Under the deal, Boeing will contribute the HorizonX portfolio, valued by industry sources at several hundred million dollars. It will also provide a specialist industrial perspective and receive preferential access to innovations developed by portfolio companies.
Boeing is among several aerospace groups that have until now sought to keep complete control of efforts to develop technology through in-house venture funds.
But analysts have questioned the ability of traditional aerospace firms to provide the increasing amounts of time and capital needed to generate meaningful advances in technologies like robotics and mobility.
"The main question is how you deal with scale," an industry source said.
Boeing additionally faces pressure on its balance sheet from some $60 billion in debt accumulated as the company grappled with a nearly two-year safety ban of its 737 MAX, compounded by the coronavirus pandemic.
Boca Raton, Florida-based AE Industrial Partners manages more than $3 billion of equity capital with a focus on aerospace and defense, according to its website.
Boeing launched HorizonX in 2017 as an "innovation cell focused on accelerating potentially transformative aerospace technologies," and at one time said its investments would total tens of millions of dollars per year.
Among HorizonX's investments was a $20 million stake in Richard Branson's suborbital tourism venture Virgin Galactic, which flew the billionaire British businessman to the edge of space last month.
Boeing also invested in the now-collapsed hybrid-electric planemaker Zunum Aero.
Some industry officials expect more joint ventures and financial partnerships as aerospace companies tackle challenges such as the decarbonization of aviation and a digital revolution in manufacturing.
(Reporting by Tim Hepher in Paris, Eric M. Johnson in Seattle and David Shepardson in Washington; Editing by Matthew Lewis)