Montreal, QC — ACE Aviation Holdings Inc. (ACE) has agreed to sell a 70% interest in its wholly owned maintenance, repair and overhaul (MRO) subsidiary ACTS LP (ACTS) to a consortium consisting of Sageview Capital LLC, a private investment firm, and KKR Private Equity Investors, L.P., the publicly traded fund of Kohlberg Kravis Roberts & Co. (“KKR”).
ACE is a holding company of various aviation interests including Air Canada, Aeroplan Limited Partnership, Jazz Air LP and ACTS LP.
Montral-based ACTS LP is a full-service aircraft MRO organization that provides airframe, engine and component maintenance and various ancillary services. Along with its subsidiary, Aeromantenimiento S.A. (Aeroman), ACTS services global customers, including Air Canada, the Department of National Defence of Canada, Air Transat, JetBlue, TACA Airlines, US Airways, United Airlines, Mexicana, Snecma Services, Chromalloy, Airborne Express and Canadian North, and operates major maintenance centres in Canada – Montral, Toronto, Winnipeg and Vancouver – and El Salvador with a combined workforce of some 4,800 employees.
ACE will retain a 30% equity interest in ACTS and Air Canada will remain its largest customer. The transaction implies an enterprise value of approximately $975 million (all figures in Canadian dollars) for 100% of ACTS on a cash and debt free basis.
“This transaction is an important step in ACE’s strategy of unlocking the value in all of our businesses,” said Robert Milton, chairman, president and chief executive officer of ACE. “ACE’s retained 30% ownership of ACTS in partnership with Sageview and KKR is in line with our strategy of generating additional value for our shareholders by furthering the development of ACTS as a stand-alone, profitable entity.
“Among their many successes, KKR and Sageview have a track record of helping businesses that were once part of large conglomerates to become bigger, stronger and more competitive as independent organizations. Prime examples include Shoppers Drug Mart, Yellow Pages Group, and ITC, the former transmission business of Detroit Edison. They bring a long-term approach to creating lasting value, and together with them we believe great things will happen with ACTS.”
“This investment brings us closer to our goal of establishing ACTS as the leading independent aircraft maintenance provider in the Americas,” said Chahram Bolouri, president and chief executive officer of ACTS. “We are very excited to have the support of such world-class partners. Sageview and KKR bring enormous expertise and resources that will contribute to ACTS’s long-term success.
“Canada is a mature market for ACTS,” added Mr. Bolouri. “To be successful, we have to leverage our current capabilities and expand beyond our borders to capture a growing share of an US$18 billion market opportunity for MRO services in North and South America. Our objective is to build a Canadian-based global player in the MRO business. The result will be a stronger company better able to meet the needs of our customers and provide job stability and opportunities for our employees.”
Scott M. Stuart, a founding partner of Sageview, said, “ACTS has established itself as a premier maintenance, repair and overhaul organization for the airline industry. With its highly talented management team and skilled labour force, the Company is well positioned to build on its broad technical strengths and leadership position in the Canadian market for long-term growth.
“We and KKR look forward to leveraging our experience in building successful, independent businesses to assist ACTS’ management in developing the business across the Americas.”
KPE’s investment is being made through an affiliate of its investment partnership, KKR PEI Investments, L.P. The transaction is expected to close during the third quarter of 2007, subject to customary closing conditions and regulatory approvals.