Mar. 6—Albuquerque-based Aspen Avionics is on a fast track to the Nasdaq through a newly announced merger between Aspen's parent firm, AIRO, and the publicly-listed Kernal Group Holdings.
Aspen Avionics — a homegrown, venture-backed firm that launched in 2004 — is a pioneer in the aviation industry's transition from analog systems to digital avionics. Over the past 19 years, it's grown into a global supplier of drop-in digital avionics products and services to convert small commercial and general aviation aircraft to 21st century control technology.
In fall 2020, however, Aspen merged with the AIRO Group, becoming one of six aerospace-related companies that now pool their individual strengths through AIRO to collectively grow their share of commercial and military markets for unmanned aerial systems and aircraft.
Together, AIRO's sister companies offer comprehensive products and services, including advanced avionics brought by Aspen, drone and electronic-air-mobility technology, and parts and training for military systems.
Last summer, AIRO submitted a draft registration statement with the Securities and Exchange Commission to go public on a U.S. stock exchange. And now, AIRO has signed a definitive agreement with Kernal — a special purpose acquisition company, or SPAC — that's listed on the Nasdaq.
SPACs are shell companies created by investors and listed on a stock exchange to later merge with real companies like the AIRO Group that want to go public, creating an easier and faster path for aspiring private firms to become publicly-traded through an initial public offering, or IPO.
AIRO and Kernal announced their merger Monday morning. And, once that transaction is complete, the newly merged company expects to launch an IPO on the Nasdaq, likely this summer.
AIRO's sister companies expect the merger and IPO to accelerate their combined development into a competitive, middle market firm that offers many aerospace products and services, said AIRO Group CEO Joe Burns.
"We're excited about the opportunity to become a mid-tier player in the aerospace and defense markets," Burns told the Journal. "Many other mid-tier companies have merged with much larger firms, offering us an opportunity to compete in the middle market space as a nimble, innovative alternative beyond the giant entities."
AIRO companies are already generating significant revenue from operations, with $43 million in projected income in 2023. Among other things, that includes current drone operations for commercial and military clients, such as reconnaissance flights in Ukraine.
Kernal and AIRO project $847 million in total company value once their merged firm is listed on the stock exchange. They expect total revenue to reach $2.7 billion within seven years.
In part, that projected growth reflects advanced development on a new electric-powered rotorcraft that AIRO expects to begin commercial operations by 2026. The craft — which takes off and lands like a helicopter but flies like a plane — is specially designed for cargo and passenger flight in urban and suburban areas.
For Aspen Avionics, the upcoming IPO could mean a long-awaited payday for venture investors who pumped about $50 million into the company since 2004. That includes $8 million in New Mexico State Investment Council money that Santa Fe-based Sun Mountain Capital — which manages SIC investments in local startups — contributed to Aspen.
After the IPO, investors could choose to keep their capital in Aspen to grow their earnings, or recoup investments with potentially substantial profit, said Sun Mountain Managing Partner Brian Birk.
"The IPO is a terrific opportunity for Aspen to raise additional capital and continue growing," Birk told the Journal. "It's a great outcome for the company, and for New Mexico."
Aspen employs nearly 50 people at a 15,000-square-foot facility in Albuquerque. It reached about $20 million in revenue in 2019.
The company expects to continue operating in New Mexico, said John Uczekaj, Aspen CEO and now AIRO president and chief operating officer.
"We'll expand our capabilities as AIRO works to consolidate its manufacturing operations," Uczekaj told the Journal. " New Mexico has been a great place for us."
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