Chorus Aviation Inc. (Halifax) on May 1 announced that it has successfully closed its acquisition of 519222 Ontario Limited, a holding company that owns Voyageur Airways Limited (North Bay, Ontario) and its related companies, a leading provider of specialized aviation services with international operations.
The acquisition was first announced on March 12, 2015.
Chorus Aviation continued:
The purchase price, on a cash free/debt free basis, represents a total enterprise value of approximately $80 million and is subject to certain post-closing working capital adjustments. Utilizing cash on hand, Chorus paid $47.0 million and issued $8.0 million in Chorus Class B Voting Shares to Max Shapiro, sole owner of Voyageur. Approximately $25 million in deferred cash payments will be paid in separate installments over the next 36 month period. The $80 million purchase price is supported by the appraised value of Voyageur’s owned aircraft, real estate and working capital.
The $80 million purchase price represented an attractive multiple of approximately 4.7 times 2014’s adjusted EBITDA1, and is immediately accretive to Chorus’ consolidated earnings and free cash flow1.
Voyageur, a Transport Canada approved air operator, is an integrated provider of specialized aviation services, including contract flying operations both internationally and domestically, and offers advanced engineering and maintenance capabilities. Voyageur was founded almost 50 years ago in 1968, and is a private company headquartered at its 200,000 square foot facility in North Bay, Ontario. The company primarily operates within two aviation services sectors:
Specialized contract flying operations.
The company operates medical, logistical and humanitarian flights serving blue chip clients comprised primarily of government entities and international non-governmental organizations. Voyageur has a total of 18 aircraft of which 13 are owned and 5 leased with the majority being Bombardier DHC-8-300 (below) and CRJ200 aircraft (above). Voyageur currently operates in Canada, Africa and Central Asia.
Specialized engineering and advanced maintenance operations.
As a certified Design Approval Organization by Transport Canada, the company has developed a number of Supplemental Type Certificates for modifications and improvements for Bombardier regional aircraft. The company is an ‘approved maintenance organization’ under Transport Canada, United States Federal Aviation Administration and European Aviation Safety Agency regulations. The company has full in-house design engineering and aircraft modification capabilities for special mission integration and support requirements along with parts sales and manufacturing. The company also has storage and parking capabilities for up to 65 regional aircraft at its North Bay facility.
Voyageur also operates a small fixed-base operation at the North Bay airport providing services such as aircraft fueling, ground handling and aircraft hangar and storage facilities.
The company has a track record of strong financial performance with solid revenue and consistent free cash flow generation. For the last fiscal year ended December 31, 2014, Voyageur generated adjusted EBITDA1 of approximately $16.9 million.
RBC Capital Markets acted as exclusive financial advisor to Chorus on the transaction, and Osler, Hoskin and Harcourt LLP acted as legal advisor to Chorus. Gowling, Lafleur, Henderson LLP acted as legal advisor to Voyageur.
1 Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA
EBITDA is defined as earnings before net interest expense, income taxes, and depreciation and amortization and is a non-GAAP financial measure. Adjusted EBITDA (net income before net interest expense, income taxes, depreciation and amortization and other items such as asset impairment and foreign exchange gains or losses) is a non-GAAP financial measure used by Chorus, and commonly by other regional airlines in the industry, as a supplemental financial measure of operational performance. Management believes Adjusted EBITDA assists investors in comparing Chorus’ performance on a consistent basis without regard to depreciation and amortization, which are non-cash in nature and can vary significantly depending on accounting methods and factors such as historical cost. Adjusted EBITDA should not be used as an exclusive measure of cash flow because it does not account for the impact of working capital growth, capital expenditures, debt repayments and other sources and uses of cash, which are disclosed in the statement of cash flows, forming part of the financial statements.
Free Cash Flow
Free cash flow is a non-GAAP financial measure used as an indicator of financial strength and performance. Free cash flow is defined as cash flows from operating activities, as reported in accordance with GAAP, less total capital expenditures and dividends.
All images by Voyageur Airways and Chorus Aviation.