Aviation & Aerospace M&A Quarterly

Aviation & Aerospace M&A Quarterly Q4 2013 In this edition: • AerospaceIndustry Events, Pivots Key to Deals and CommercialHot Spots in andthe AviationGlobal Growth Sector • AirlinesPockets Joinof Activity Forces in the Aerospace Sector • Strategics and Private Equity Vie • for3-D Aerospace Printing: Game and Aviation Changer Assets in Aviation and Aerospace A newsletter published by ICF SH&E in association with Mergermarket 1 page titletitle Aviation & Aerospace M&A Quarterly Q4 2013 Contents 03 Introduction 04 Q4 2013 Highlighted Transactions 06 Industry Events, Key Deals and Hot Spots in the Aviation Sector 10 Pockets of Activity in the Aerospace Sector 12 3-D Printing: Game Changer in Aviation and Aerospace 15 About ICF SH&E ICF SH&E is a global consulting firm dedicated to aviation and aerospace, providing strategic and transaction advisory services to clients across the spectrum of air transport. 2 pageContents title Aviation & Aerospace M&A Quarterly Q4 2013 Introduction ICF SH&E is pleased to present the second edition of Aviation & Aerospace M&A Quarterly, published in association with Mergermarket. This publication highlights activity and trends in aviation and aerospace M&A in Q4 2013. Aviation deal activity covers airlines, air freight, leasing, business and general aviation operators, and aviation IT and service providers such as those involved in handling or catering. Aerospace deal activity includes commercial and defense-related firms such as original equipment manufacturers (OEMs), aerospace suppliers, and maintenance repair and overhaul providers (MROs). In the fourth quarter of 2013, aviation activity was industry, the helicopter sector attracted significant up while aerospace activity was down compared to the investor interest, with several key deals announced previous quarter. According to Mergermarket data for Q4 in Q4 2013, including those of operators and lessors. 2013, there were 35 aviation deals worth US$7.6 billion, up Sector wide, M&A will likely continue to rise in from 32 deals worth US$2.0 billion in Q3 2013. By contrast, response to policy changes and favorable valuations. the number of aerospace deals declined to 42, worth In aerospace, the budget agreement currently pending approximately US$3.6 billion, compared to 69 deals worth approval by Congress is expected to provide government US$5.4 billion in Q3 2013. Both sectors received a boost contractors some measure of certainty about near-term in M&A value from landmark deals, including AerCap’s defense spending. The two-year agreement softens US$5.4 billion acquisition of International Lease Finance by US$52 billion what would have been even deeper Corporation (ILFC), the second-biggest aircraft leasing automatic spending cuts by the Pentagon, and lessens company worldwide, from American International Group other mandatory reductions in defense spending for the (AIG). On the aerospace side, Textron’s purchase of Beech next year. Holdings for roughly US$1.4 billion in cash drove up deal Aside from the clarity that comes with the budget value significantly in the sector during the quarter. deal, another factor that could be a boon to M&A levels Across the board, the end of 2013 brought significant in 2014 is the attractive multiples of companies in the developments in the combined aviation and aerospace aerospace sector and continued interest from Asian sectors. Commercial aviation stole the spotlight when acquirers. According to Mergermarket’s Richard Tekneci, the Gulf airlines ordered a record number of aircraft EBITDA multiples are around the high single-digit to low at the Dubai Airshow in November, emphasizing just double-digit range, based on different industry sources how important these mega-carriers have become to as well as recent deals. the aviation ecosystem, and how important they will Outside the US, Chinese investors have shown their be in the future. In the airline sector, the long-awaited ongoing interest in foreign aerospace assets through a merger between American Airlines and US Airways couple of key acquisitions, including Hong Kong Aircraft was approved by the US Department of Justice; and in Engineering Company’s (HAECO) purchase of US-based what was once considered a niche area of the aviation TIMCO Aviation Services. This second edition of the Aviation & Aerospace M&A Q4 2013 Aviation and Aerospace M&A Activity Quarterly takes an in-depth look at the forces that drove activity in the aviation and aerospace sectors during the final quarter of 2013. The publication examines the drivers of M&A activity in the coming months and years, Volume Value US$m and notably profiles advances in “additive manufacturing,” 35 7,589 also known as “3-D printing,” a disruptive technology 42 3,550 poised to fundamentally transform parts of the aerospace supply chain. Aviation Aerospace 3 Introduction Aviation & Aerospace M&A Quarterly Q4 2013 Q4 2013 Highlighted Aviation Transactions Announced Target Company Bidder Company Deal Value Date US$(m) 10/01/2013 Frontier Airlines Inc Indigo Partners LLC 145 10/09/2013 Weststar Aviation Services Sdn Bhd (30% Stake) Kohlberg Kravis Roberts & Co. L.P. 202 10/21/2013 IFE Services Global Eagle Entertainment 30 10/29/2013 Hangar 10 Aviation Services Atlantic Aviation 11/6/2013 Hart Aviation SGS 11/17/2013 Darwin Airline SA (33.3% Stake) Etihad Airways 11/18/2013 Blue Hawaiian Helicopters Blue Methods Corporation 11/19/2013 The Airline Group Limited (49.9% Stake) Universities Superannuation Scheme Limited 231 11/20/2013 American Care Air Ambulance REVA Air Ambulance 11/22/2013 Mechtronix Systems Inc Textron Inc. 11/22/2013 Opinicus Corporation Textron Inc. 12/4/2013 MNH Sustainable Cabin Services MNH Grp. Ltd. 12/09/2013 Cargolux Airlines International S.A. (35% Stake) Henan Civil Aviation Development and Investment 231 Co Ltd 12/09/2013 West Atlantic AB (25% Stake) Air Transport Services Group 12/12/2013 Yunnan Lucky Air Co Ltd (52.9% Stake) Hainan Airlines Co Ltd 280 12/16/2013 Noordzee Helikopters Vlaanderen NV Ardian 137 12/16/2013 International Lease Finance Corporation Aercap 5,400 12/18/2013 Priority One Jets Inc. NuMobile Inc. 7 12/19/2013 CityJet/VLM Airlines (unit of AirFrance-KLM) Intro Aviation GmbH 4 Q4 2013 Highlighted Aviation Transactions Aviation & Aerospace M&A Quarterly Q4 2013 Q4 2013 Highlighted Aerospace Transactions Announced Target Company Bidder Company Deal Value Date US$(m) 10/07/2013 Performance Plastics Inc. Shimtech Industries Limited 10/07/2013 Universal Asset Management, Inc. UAM Holdings, Inc. 10/11/2013 Ascent Aviation Services Corp. LongueVue Capital, LLC 10/21/2013 Avionics International Supply, Inc. Aerospace Products International, Inc. 10/23/2013 Timco Aviation Services, Inc. Hong Kong Aircraft Engineering Company Limited 389 10/28/2013 Mac Fasteners, Inc. TriMas Corporation 34 11/04/2013 PGA Electronic SA Astronics Corporation 29 11/05/2013 Helisota Ltd. (96.2% Stake) Avia Solutions Group AB 8 11/14/2013 Precise Machining & Manufacturing, Inc. Accurus Aerospace Corporation; Hamilton Lane (private investor) 11/25/2013 Trac Group Limited Chromalloy Gas Turbine LLC 12/02/2013 Thermal Engineering Limited Senior Plc 46 12/02/2013 Airborne Systems Group Limited TransDigm Group Inc 250 12/2/2013 PFW Aerospace GmbH (cargo loading system assets) AAR 12/05/2013 Avtron Aerospace, Inc. CapitalWorks, LLC 12/13/2013 Keywell LLC KW Metals, LLC 16 12/16/2013 Precision Gear Holdings LLC Rexnord Corporation 78 12/20/2013 Beechcraft Corporation Textron Inc. 1,400 12/20/2013 Joslyn Sunbank Company, LLC Esterline Technologies Corporation 50 5 Q4 2013 Highlighted Aerospace Transactions Aviation & Aerospace M&A Quarterly Q4 2013 Industry Events, Key Deals and Hot Spots in the Aviation Sector Aviation M&A Dubai Airshow orders in context, the German flag-carrier Lufthansa In the past year, the Middle East carriers have continued ordered 34 of Boeing’s 777X jets in September 2013, to expand their influence in the aviation sector. Their compared to Emirates’ order of 150 of the same type. efforts reached a peak at the Dubai Airshow, the most The unprecedented orders by the Gulf airlines notable trade event for the commercial aerospace underscore the importance these airlines have taken in industry in Q4 2013. On the first day alone, commercial the global aviation and aerospace industries. To fill these aircraft orders with a value of US$192.3 billion at list price 500 new aircraft, carriers in the Gulf will need to carry were announced, easily setting a new record. And despite many passengers who would otherwise have flown on the rains and the floods that beset the affair, organizers European, Asian, or North American airlines. At this scale, have called it historic, with orders for new aircraft even small changes in strategy by the Gulf carriers would exceeding US$200 billion at list prices. have significant ramifications for the entire industry. At the center of the excitement were the region’s When added to the current fleets, the aircraft on largest airlines – Emirates, Qatar Airways, and Etihad – order at airlines in the Gulf suggest that their fleets collectively ordering nearly 400 aircraft. Emirates’ sister would triple from where they are today1, implying an airline, flydubai, also announced orders that brought the average annual growth rate of almost 12%, year after combined total to more than 500 aircraft. To put these year. Of course, not all of the aircraft on order will be Aircraft orders at the Dubai Airshow Emirates flydubai No. of Aircraft2 0 Orders0 No. of Aircraft1 1 Orders1 2 0 0 1 1 1 Value of Aircraft Orders Value of Aircraft Orders U S $ 9 9 b U S $ 1 1 . 4 b U S $ 9 9 b U S $ 1 1 . 4 b Etihad Qatar Airways No. of Aircraft1 4 Orders3 No. of Aircraft5 Orders5 1 4 3 5 5 Value of Aircraft Orders Value of Aircraft Orders U S $ 5 2 .

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