Canada’s Chorus Aviation (TSX: CHR) has acquired U.K.-based Falko Regional Aircraft Ltd., a leading regional aircraft lessor and management firm, for $855 million.
The deal—a combination of $445 million cash and $410 million debt—is one of the largest M&A deals in the aerospace sector this year. The deal should close in the second quarter of 2022 pending regulatory approval.
Falko was founded in 2011 with funding from Fortress Investment Group that purchased BAE Systems Asset Management (LON: BA) and its associated aircraft portfolio.
Up until the sale to Chorus, Falko managed a $3 billion portfolio of approximately 320 modern regional jet and turboprop aircraft, on lease to leading airlines worldwide, combined with a growing engine leasing and trading business.
Chorus will also receive Falko’s asset management platform and Fortress Investment Group’s equity interests in 126 owned and managed regional aircraft. Once combined, Chorus will have 353 owned, operated, and managed regional aircraft, with as many as 32 airline customers in 23 countries, including Delta Air Lines (NYSE: DAL), American Airlines (NASDAQ: AAL), and British Airways (OTCMKTS: ICAGY).
Chorus Aviation describes itself as a global provider of integrated regional aviation solutions. The parent company also operates Chorus Aviation Capital—another leasing division—Jazz Aviation and Voyageur Aviation. Chorus also offers services that include aircraft refurbishment, component maintenance, modification, contract flying, parts provisioning, and more.
In a statement, Joe Randell, president, and chief executive officer of Chorus, called the deal “transformative” and inferred the deal would allow the company to be closer to achieving its goal to become a full-service provider in regional aviation.
Brookfield Joins Deal
Related to the deal, Brookfield Asset Management (NYSE: BAM), one of the largest asset management companies worldwide, agreed to invest $374 million in Chorus, including $300 million of preferred equity and $74 million of common equity, for a 12.5 percent stake in Chorus and other investor rights that it can choose to exercise.
BAM will immediately exercise one right to add two directors to Chorus’ board, nominating David Levenson and Frank Yu, a managing partner, and investor at Brookfield, respectively.
In the same statement, Randell welcomed the infusion of capital from Brookfield and explained how his company plans to leverage the partnership.
“We are extremely pleased to have Brookfield, a well-respected company with global reach, as our strategic cornerstone investor, bringing extensive experience in asset management, fundraising, and capital markets,” Randell said. “The equity investment is an important endorsement of our strategy.”
Jeremy Barnes, CEO of Falko, pointed to various factors that made the deal attractive.
“The size and scale of the newly combined entity broadens and enhances market opportunities,” Barnes said in a statement. “Growth through this established asset management platform meaningfully changes Chorus’s risk profile in terms of debt levels, residual value asset risk, and enhanced earnings stability and diversity.”
