TheChek News Flow

Just how valuable is two hours and change to hurried corporate executives or the ultrarich? Aerospace executive Doug Nichols reckons the answer could be pushing $120 million.

The former Boeing Co. executive spent seven years developing a supersonic business jet that aims to fill the void created when the Concorde quit flying in 2003. He is targeting those who absolutely need to fly from London to New York in 4½ hours rather than seven.

Aerion Corp., where Mr. Nichols is chief executive, has the most advanced of several similar projects. It recently secured orders for its planned 12-passenger AS2 jet. For the $120 million price, a buyer can go 4,750 nautical miles at up to 1.5 times the speed of sound.

Before it can achieve its goals of first flight in 2021 and service two years later, Aerion needs to overcome long-held skepticism among business-jet financiers and plane makers about the viability of supersonic jets and convince prospective buyers and regulators of their merits.

Aerion estimates the AS2 will cost $4 billion to develop, produce and certify, requiring new financing after it dropped a plan to license its technology to another plane maker. Its timeline to first service also is so aggressive, it would challenge even more experienced manufacturers.

The biggest hurdle remains a ban on commercial jets flying at supersonic speeds over the continental U.S. Other countries also require ultrafast planes to spend as much time as possible over the ocean to avoid the distinctive boom when they exceed the speed of sound.

“The straightest route is not necessarily the fastest route,” said Mr. Nichols of the flight plans the AS2 would have to take to skirt the U.S. and Canadian coasts and link London and New York while shaving 2½ hours over a conventional business jet flying a more direct route at close to the speed of sound.

Aerion has followed a similar, deviated path. The closely held company was created in 2002 by private-equity billionaire Robert Bass, an aerospace enthusiast who plowed funds from his Oak Hill investment firm into the venture. Its first concept plane was launched in 2007 and claimed 50 orders, but was canceled two years later as the financial crisis crushed sales of new business jets, a downturn the industry is still trying to escape.

Dassault Aviation SA and the Gulfstream unit of General Dynamics Corp. are researching the supersonic market, but neither is expected to try to introduce models for years. Aerion’s rivals remain skeptical of the supersonic market, which they said was limited to trans-Atlantic crossing. “A business jet in that space doesn’t make sense,” said an executive at one plane maker.

Still, the Aerion AS2 last month secured its first orders, with fractional jet specialist Flexjet LLC signing up for 20 of the planes, albeit with refundable deposits.

“The aircraft is very mission specific,” said Kenn Ricci, who as chairman of Flexjet has ordered dozens of conventional business jets from Gulfstream, Bombardier Inc. and Embraer SA.

Mr. Ricci said Flexjet spent a year studying the AS2 as an add-on to its evolving fleet, eyeing well-heeled and time-poor passengers on popular business-jet routes such as from London to New York or Dubai, or between the Persian Gulf city and Chinese cities. While the AS2 would cost 35% more to operate than a conventional jet, potential clients aren’t price sensitive.

Aerodynamic laws require that supersonic planes be long and thin, and the existing AS2 is 170-feet long and has a maximum takeoff weight of 121,000 pounds, limiting its use at popular close-in airports such as Teterboro in New Jersey, a favorite gateway for Wall Street’s highfliers.

Aerion said the AS2 would be able to cross the Atlantic from Teterboro, albeit with a smaller fuel load that would restrict how many passengers it could carry.

Mr. Nichols said that despite such limitations and the challenge of sonic booms, it would be a viable addition for customers even for transcontinental U.S. travel by maximizing flying at high subsonic speeds.

“We are not pursuing any relaxation of sonic boom regulations in the U.S.,” he said, though in other countries with less onerous rules, the company hopes to be able to fly at supersonic speeds over land. Its technology would ensure the boom doesn’t reach the ground and contravene regulations, he said.

Aerion isn’t alone. Boston-based Spike Aerospace Inc. has been touting its proposed S-512 jet at trade shows. The $100 million jet could be ready by 2022, said Chief Executive Vik Kachoria, with a top cruising speed of 1.6 times the speed of sound and a range of around 5,580 nautical miles.

Mr. Kachoria said the key to unlocking the market is to minimize noise. The company, which initially designed the S-512 to fly at top speeds only over water, refined the concept to permit overland flights with only minimal noise impact. The plane’s noise should be limited to around 65 decibels, about the same as a normal conversation, he said.

Broadening the customer base by opening more markets would help. The market for supersonic business jets is likely between 300 and 350 aircraft over between 15 and 20 years, estimates Michel Merluzeau, vice president for aerospace strategy at researcher Frost & Sullivan.

Mr. Nichols, who forecast a market of 600 planes over two decades, is scouting for a production site in the U.S. For now, he is relying on Mr. Bass for funds, much as a new generation of space rockets have been funded by Elon Musk at Space Exploration Technologies Corp., known as SpaceX, and Amazon.com founder Jeff Bezos.

“[Bass] funding may have been a godsend in getting the program going,” said Richard Aboulafia at aerospace consultant Teal Group, but building, testing and certifying the jet will cost much more.

“That’s many billions that have to come from someone else,” he said.

Tussle over China Vanke has potential to become country’s first hostile takeover battle

There are not many countries where, in a corporate showdown pitting new money against old, the old money was made in the 1990s.

Such a battle is brewing in China, where an obscure insurer — privately held Baoneng Group — has built up the largest single stake in one of the country’s biggest property companies, China Vanke.

Vanke is also one of China’s best known corporate brands with a celebrity chairman, Wang Shi. Baoneng and its low-key founder, Yao Zhenhua, were largely unheard of until this year.

Adding to the intrigue surrounding what could become China’s first full-blown hostile takeover battle, Vanke has sought a potential white knight in the form of Anbang, another private insurance group but one with a “princeling” pedigree: Anbang founder Wu Xiaohui is married to a granddaughter of Deng Xiaoping, the late paramount leader and architect of China’s economic transformation.

Over recent months, Baoneng Group companies quietly amassed more than 20 per cent of Vanke’s Shenzhen- and Hong Kong-traded shares. Up to that point Vanke’s largest shareholder was state-owned conglomerate China Resources, with a 17 per cent stake.

Mr Wang, 64, decried the development as one that could “ruin” his company’s brand. Vanke put a temporary halt to Baoneng’s stake-building by suspending trading in its shares on December 18, pending a “restructuring” announcement expected next month.

But according to Credit Suisse, which hosted two investor presentations by Vanke’s chairman on December 23, Mr Wang said there would be no poison pill and that all shareholders’ interests would be protected. Any new equity placement would also require the approval of investors in more than two-thirds of the company.

Baoneng declined an interview request. Vanke did not respond to a request for comment.

Mr Wang is not used to playing defence. He has been a fixture of China Inc since the mid-1990s, when Vanke began building a name for itself in the southern boomtown of Shenzhen.

A former railway official and then foreign trade official in Guangdong province, Mr Wang abandoned the civil service and “jumped into the sea” of commerce just as Deng’s historic economic reforms were gathering pace in the 1980s.

After dabbling in foreign trade, he made a well-timed entry into the property sector and soon cemented Vanke’s reputation as a widely admired developer of quality residential housing in the country’s largest and richest urban centres.

Jeffrey Gao, a Hong Kong-based property analyst with Nomura, says Vanke’s financial performance has been impressive. The developer achieved an 18 per cent return on equity in 2014 compared to an average of 10 per cent for listed Chinese companies.

Unusually for his peer group, Mr Wang has cultivated a celebrity profile as an avid mountain climber, parachutist and environmentalist. He has taken sabbaticals to study at prestigious overseas universities such as Harvard and Cambridge, while gossip websites track his love life with enthusiasm.

He is also unusual amongst Chinese entrepreneurs in not having sought to retain a controlling stake in the company he founded, leaving him vulnerable to unwanted suitors.

“Wang is always on social media,” says Edward Tse, a veteran China consultant and author of a recent book on the country’s entrepreneurial “disruptors”. “Before he seemed untouchable but he’s actually at very serious risk right now. That is what has drawn everyone’s attention.”

By contrast, Mr Wang’s nemesis at Baoneng was almost unheard of before Vanke’s criticism of his share purchases put him on the map. Mr Yao, 45, studied industrial management and food engineering at university. His first company was a grocery chain, from which he quietly expanded into logistics, property and eventually insurance.

Mr Yao now stands on the cusp of becoming Communist China’s first corporate raider.

Some analysts think Mr Yao spotted an opportunity that could herald a new corporate era in which Chinese companies with diversified ownership structures and attractive share prices will have to watch their backs.

“This is a natural evolution in China’s development into more of a market economy,” Mr Tse says. “You had a situation where Vanke’s share price was depressed for a long time and its ownership is quite diversified.”

Others say Mr Yao may not need to launch a bid for full control of Vanke to achieve his aims. Mr Gao at Nomura argues that it makes sense for Chinese insurance companies like Baoneng and Anbang to invest in property developers with good portfolios for purely financial reasons.

Many have done exactly that as returns from equities and other investments shrink and the government eases restrictions that previously limited their property exposure. According to Mr Gao, the average dividend yield for China’s listed property developers is around 5 per cent, while insurance companies have averaged annual investment returns of 4.7 per cent over the past decade.

The dividend yield on Vanke’s Shenzhen-listed shares has fallen to 2 per cent because of the jump in the share price linked to Baoneng and Anbang’s recent stake-building. But the company has said it plans to increase its dividend payout.

An additional benefit for Baoneng is that, having acquired more than 20 per cent of Vanke, it can now classify the developer as an associate and therefore include its dividends in its own profit and loss statement.

If that were Mr Yao’s goal, however, he could have stopped his stake-building in Mr Wang’s company at 20.1 per cent. He did not. Unless a truce can be negotiated during Vanke’s trading suspension, hostilities will resume next month.

Something Just Snapped Again In China - B-Shares Crash Most In 4 Months

The New York-based private-aircraft ordering app wants to make sure prospective fliers aren’t going to upset their fellow passengers with boozy bad behavior following a night in Margaritaville.

Blade’s flights to Miami are, after all, billed as a “dinner party in the sky.”

Blade has its own popular Instagram destination where fliers post photos of themselves, but insiders tell On the Money the staff has been able to head off some potentially ugly incidents by keeping a close watch on other social-media feeds and suggesting clients take alternative transportation.

Another reason for the surveillance? Figuring out the seating plans so that sworn enemies aren’t located too close to each other.

While the warm weather has kept some New Yorkers close to home this holiday season, we spied ads for Blade in the local Miami media encouraging snowbirds to come home instead.

MArshal Wace bought back 45k