Chorus Aviation (Chorus) has entered into an agreement to sell all assets in its Regional Aircraft Leasing (RAL) segment, including Falko Regional Aircraft Limited (Falko) and Chorus’ equity interests in the aircraft investment funds managed by Falko and its affiliates, to affiliates of investment funds managed by HPS Investment Partners (the transaction). The aggregate consideration for the transaction is approximately CA$1.9 billion, of which CA$814 million is in the form of cash (net of estimated transaction expenses) and CA$1.1 billion is in the form of aircraft debt to be assumed or prepaid by the buyers at closing and the value of the non-controlling interest.
“We are pleased to announce this transaction, which is a catalyst for unlocking the embedded equity value in our RAL segment,” stated Colin Copp, President and Chief Executive Officer, Chorus. “This is a compelling transaction for shareholders with net proceeds representing a significant premium to the implied market value of the segment and at a price consistent with the trading multiples of our aircraft leasing peers.”
“This transaction will allow us to significantly reduce our debt and corporate financings, leaving Chorus with strong and predictable free cash flows from our long-term contracts. That will enable us to implement a sustainable return of capital programme for our common shareholders and invest in future growth,” added Copp. “We will leverage our deep operational expertise and capabilities to focus our growth on aviation services, as demonstrated by recent growth in Voyageur’s business.”
Brookfield holds approximately 13.2% of Chorus’ outstanding common shares, and Air Canada holds approximately 8.1% of Chorus’ outstanding common shares. Both shareholders have signed voting support agreements with the buyers, pursuant to which they have agreed to vote in favour of the approval of the transaction and are expected to maintain representation on the company’s board of directors following completion of the transaction. Chorus and Air Canada have also agreed to amend and restate the investor rights agreement between them to, among other changes, reinstate Air Canada’s pro-rata pre-emptive rights and reduce the ownership threshold applicable to Air Canada’s director nomination right.
The Transaction is expected to close by the end of this year. (US$1.00 = CA$1.38 at time of publication).
