MONTREAL_Air Canada parent ACE Aviation Holdings Inc. is selling a 70 percent stake in ACTS LP, its aircraft maintenance, repair and overhaul subsidiary, for $683 million Canadian (US$639 million, €475.4 million) to a consortium that includes KKR Private Equity Investors.
The deal, also involving investment firm Sageview Capital LLC, values ACTS at $975 million Canadian (US$912 million, €678.5 million).
ACE will retain a 30 percent stake in ACTS, while Air Canada will remain its largest customer.
ACTS's customers include Air Canada, Canada's Defence Department, Air Transat, JetBlue, US Airways and United Airlines. It has maintenance centers in Montreal, Toronto, Winnipeg and Vancouver, along with El Salvador, with a workforce of 4,800.
"This transaction is an important step in ACE's strategy of unlocking the value in all of our businesses," Robert Milton, the holding company's chairman and CEO, said Friday in a release.
Maintaining a minority share in ACTS furthers ACE's strategy of generating additional value for shareholders by developing the maintenance subsidiary as a stand-alone business, he added.
"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," Milton said.
KKR and Sageview's other Canadian investments have included Shoppers Drug Mart and Yellow Pages Group.
"This investment brings us closer to our goal of establishing ACTS as the leading independent aircraft maintenance provider in the Americas," said Chahram Bolouri, chief executive of ACTS.
Since Canada is a mature market for the airline maintenance business, the company will have to leverage its capabilities and expand internationally to capture a larger share of the US$18 billion (€13.39 billion) market in North and South America, he added.
The transaction is expected to close during the third quarter of 2007, subject to customary closing conditions and regulatory approvals.
Sageview Capital LLC is a US$1.35 billion (€1 billion) private investment fund founded in 2006 by Edward Gilhuly and Scott Stuart, both formerly KKR partners. It has offices in Greenwich, Connecticut and Palo Alto, California.
KKR is one of the world's oldest private equity firms specializing in management buyouts, with offices in New York, London, Paris, Hong Kong and Tokyo. It has completed more than 150 transactions with a total value exceeding US$279 billion.
