TIDMGMAA
RNS Number : 4467Q
Gama Aviation PLC
18 October 2023
18th October, 2023.
The information contained within this announcement is deemed to
constitute inside information as stipulated under Article 7 of the
Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK
domestic law by virtue of the European Union (Withdrawal) Act
2018.
Gama Aviation Plc (AIM: GMAA)
("Gama Aviation" or the "Company" or "Group")
Gama Aviation agrees to sell Jet East for US$131m.
Gama Aviation Plc (the "Company") today announces that it has
conditionally agreed to sell the Group's US MRO Business, Gama
Aviation (Eng) Inc. ("GAEI"), trading as Jet East ("Jet East"), to
West Star Aviation Enterprises, LLC ("West Star Aviation") for a
value of approximately US$131 million on a cash free/debt free
basis with normalised working capital ("Disposal").
Deal highlights
-- The deal ascribes an enterprise value of US$131 million to the Group's US MRO business.
-- Net proceeds from the sale of Jet East are approximately US$100 million.
-- The sale is contingent on Shareholder approval at a General
Meeting which is to take place at 9:00am on 3 November 2023 and the
transaction is expected to be completed shortly thereafter.
-- Irrevocable undertakings to vote in favour equivalent to
50.3% of the issued share capital (sufficient to pass the
resolution) have been received.
-- Directors of the Company will review the capital requirements
of the Group, and such constraints on returning funds to
Shareholders as may apply, and expect to return net proceeds to
Shareholders envisaged to be not less than 55 pence per share on a
fully diluted basis including options.
-- The sale will materially benefit the Group's stakeholders.
Marwan Khalek, Group Chief Executive, Gama Aviation Plc
commented;
"After interest from several parties, we are delighted to have
agreed the sale of Jet East to West Star Aviation. I believe the
new owner will be an excellent guardian of our valued strategic
relationships and, importantly, the people that deliver critical
services to our customers every day.
"The Board and I have long since believed that the Group has
significant underlying value and the resultant proceeds from this
transaction clearly affirm this perspective. Collectively we will
now consider how the net proceeds of the transaction will be
deployed to further the strategic ambitions of the Group, support
the continued hard work of our talented teams as well as rewarding
the loyalty and support of our Shareholders from this significant
value realisation event.
"This deal provides Gama Aviation the appropriate capital to
allow us to capture the tremendous opportunities we have in our
Special Mission, Technology & Outsourcing and Business Aviation
strategic business units. It is an exciting new chapter for us all
as we celebrate our 40(th) anniversary as a business.
"Finally, I would like to thank the entire Jet East team for
their considerable efforts and achievements under the leadership of
Stephen Maiden. We wish them continued success as they embark on
their own new chapter."
Background and Rationale to the Disposal of Jet East
The Group first provided aircraft maintenance services in the
United States in 2012. In January 2021 - following the 2020
disposal of its US aircraft management business to WheelsUp - the
Company announced the acquisition of Jet East (a US full-service
business aviation aircraft maintenance provider). The aggregate
consideration payable by the Group was up to US$11.9 million,
including the assumption of debt. The transaction structure also
involved the management team of Jet East participating in a shadow
equity scheme.
The activities of Jet East were combined with the existing
maintenance activities of the Group in the US, with the resulting
entity trading as Jet East. In 2020, the existing US MRO business
generated $38.6 million of revenues and in the same period the Jet
East business generated $28.2 million of revenues.
Jet East has subsequently performed strongly, benefitting from a
highly committed management team, a complementary nationwide
network of operations, strong customer relationships and cost
savings from rationalisation of operations. There has also been
considerable investment totalling some US$25 million to enable
growth including setting up new facilities in Millville, Las Vegas
and Statesville.
Jet East reported revenues of US$79.2 million in 2021 and
adjusted EBIT of US$(8.0) million. In 2022, Jet East reported
revenues of US$118.2 million (49% constant currency growth) and
adjusted EBIT of US$1.3 million. In H1 2023 Jet East reported
revenues of US$70.7 million (27% growth compared with H1 2022) and
adjusted EBIT of US$0.9 million.
In Q4 2022, the Company was approached by The Sterling Group, a
US private equity group which owns West Star Aviation (a provider
of maintenance, repair, and overhaul ("MRO") services to the
business aviation industry) about the possibility of acquiring Jet
East in order to combine it with West Star Aviation. Following a
period of negotiation and due diligence on Jet East, the Disposal
for a transaction value of US$131 million has been agreed between
the Company and The Sterling Group.
Net Proceeds
The net proceeds of the Disposal to be received by the Company
are expected to be approximately US$100 million, after (i)
repayment of third-party debt obligations of Jet East together with
transaction costs (such third-party debt obligations of Jet East
plus transaction costs totaling approximately US$24.0 million); and
(ii) amounts due to Jet East management under the shadow equity
scheme (totaling US$7.7 million). The Group does not expect to pay
material taxes on the Disposal.
As previously reported, as at 21 September 2023, the Group had
cash balances of US$9.1 million and as at 30 June 2023 net debt
(exclusive of lease obligations) of US$12.1 million including
US$12.5 million of indebtedness in Jet East) after successful
re-financing of the Group's medium term loans and revolving credit
facility as previously reported. Going forward, as a result of the
Disposal, the Company will not benefit from the anticipated
positive results of Jet East and will not be able to recover
certain central costs previously allocated to Jet East. The Group
also has a number of forthcoming financial commitments which will
require capital expenditure and usage of cash, including those
required to mobilise the recently won air ambulance and offshore
helicopter special mission contracts.
Immediately following completion of the Disposal, the Company is
expected to have gross cash balances of approximately US$99 million
and net cash (exclusive of lease obligations) of approximately
US$88 million. This net cash balance is expected to decline in
future months reflecting the operating cash outflows (including the
impact of the loss of recovery of cost allocation to Jet East) and
other financial commitments.
Following completion, the Directors of the Company will review
the current and future capital requirements of the Group, and such
constraints on returning funds to shareholders as may apply, and
expect to return a substantial proportion of the net proceeds to
Shareholders which is expected to be not less than 55 pence per
share on a fully diluted basis including options. Further details
of the amount and method of such return will be sent to
Shareholders in due course.
Shareholder Approval
In view of the size of the Disposal relative to the existing
size of the Company, the Disposal constitutes a fundamental
disposal pursuant to Rule 15 of the AIM Rules for Companies.
Consequently, it is conditional on the approval of more than 50 per
cent. of Shareholders voting at the General Meeting to be held on 3
November 2023.
For the Disposal to proceed, the Company requires Shareholder
approval. A shareholder circular ("the Circular") in relation to
the proposed Disposal will be issued today. The Circular will be
sent to the Company's Shareholders (other than those who have
elected or who have been deemed to have elected for notification by
electronic communication).
Further to this the Circular will be available on the Company's
website:
www.gamaaviation.com/investors/reports-and-presentations/
The Circular contains further information on the Disposal and a
notice convening the General Meeting of the Company to be held at
9:00 am. on 3 November 2023 at Gama Aviation Plc, First Floor, 25
Templer Avenue, Farnborough, Hampshire, GU14 6FE.
The Directors of the Company have received irrevocable
undertakings from holders of 32,182,743 Ordinary Shares in
aggregate (equivalent to 50.3 per cent. of the issued share capital
and total voting rights of the Company) to vote in favour of the
Disposal. As the level of these undertakings exceeds 50 per cent.
of the issued share capital and total voting rights of the Company
the resolution is expected to be passed and the Disposal is
expected to complete shortly following the General Meeting.
Dial Partners LLP is acting is Lead Financial Adviser to the
Company on the sale.
Contacts
Gama Aviation Plc
Marwan Khalek, Chief Executive Officer
Michael Williamson, Chief Financial Officer
Tel: +44 1252 984 515
Dial Partners LLP, Lead Financial Adviser
Angus Russell, Partner
Sandor de Jasay, Managing Director
Tel: +44 207 098 7098
WH Ireland, Nominated Adviser and Broker
James Joyce, Director
Tel: +44 207 220 1666
Camarco (PR)
Ginny Pulbrook or Geoffrey Pelham-Lane
Tel: +44 (0) 203 757 4992
Gama Aviation - Notes to Editors
Founded in 1983 with the simple purpose of providing aviation
services that equip its customers with decisive advantage, Gama
Aviation Plc (LSE AIM: GMAA) is a highly valued global partner to
blue chip corporations, government agencies, healthcare trusts and
private individuals.
The Group has three global divisions: Business Aviation
(Aircraft Management, Charter, FBO & Maintenance), Special
Mission (Air Ambulance & Rescue, National Security &
Policing, Infrastructure & Survey, Energy & Offshore); and
Technology & Outsourcing (Flight Operations, FBO, CAM software,
Flight Planning, CAM & ARC services).
More details can be found at: http://www.gamaaviation.com/
ENDS
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