'Chapter Three'

Feb. 15, 2008
Ranger Aerospace’s latest venture seeks to create a tech services depot in Ft. Worth.

FT. WORTH — In 1997, Steve Townes, CEO of investment firm Ranger Aerospace LLC, bought Aircraft Services Group International, built it up, and in turn sold it to BBA Group, parent of Signature Flight Support. That was followed by a similar takeover of Keystone Helicopter Corporation, based in West Chester, PA, which was subsequently sold to Sikorsky. Townes’ lastest venture is centered around the acquisition of Texas Aviation Services (TAS), based here at Meacham Field.

Townes and partner Brian Nerney, COO, spearheaded the new initiative with the backing of Trinity Hunt, the largest single investor in the new deal and one of the businesses of the Hunt family of Dallas. [The Hunts also own the Kansas City Chiefs of the NFL.]

Comments Townes, “We’re now in chapter three, if you will — another consolidation; rotorcraft-focused; Texas-centric.

“Six years ago we said we’re going to make Keystone the largest and best helicopter tech services company on the East Coast, and we did. Now, we’re saying, starting with Texas Aviation Services and other acquisitions, we’re going to create the largest and best helicopter technical services company across the South.

“This is actually a bigger, stronger starting point than what we started with Keystone, in terms of location, facility size, technical capacity.”

The TAS deal was completed last May, for an undisclosed sum, and followed acquisitions of Integrated Flight Systems and the Platinum Aviation Group of Reno, NV, which will be relocated to North Texas.

Texas Aviation Services was founded by Woody Woodard, 77, who last year received the Charles Taylor ‘Master Mechanic’ Award. [Taylor was the first aviation mechanic, for the Wright brothers.]

Explains TAS president Timothy D.Woodard, “I need to say, the reason that my Dad and I elected to sell this company was not just that we knew Steve and Brian [from discussions during the Keystone acquisition], but when they brought the Hunts to us, the commitment from Hunt was that those type of things that happen with private equity firms would not happen here. We live in Texas and that’s old Texas money — where handshakes are still important. That was a key part of this. We did not end up with a situation of stripping all the profit out for management.”

Says Townes, “Through Ranger, [Hunts] may end up doing three of four platform investment consolidations, not just rotorcraft. And we don’t need to go anyplace else for capital.”

The West Point graduate says that for Ranger this is pretty much a carbon copy, albeit potentially larger, of the Keystone experience, including the plan to sell in several years.

“The way that we set up Ranger is, the sellers of companies join us as shareholders,” he explains. “They take most of their chips off the table; they leave a few in the game. The strategy is to give the sellers a second payday someday when we achieve one big end-game liquidity event.

“For example, the Wright family that sold us Keystone stayed with us as management and equity partners throughout the life of the venture. They made a very, very substantial second payday when United Technologies bought the company from all of us.”

Similarly, the plan of attack on the floor is to boost productivity, one day at a time. Says Townes, “In the case of everybody at ASIG, at Keystone, and now here, we drive very hard for quality; we increase the investment in training. Each time we have consistently improved the benefits, pay scale, and bonus opportunities for everybody that works in the building.

“At Keystone, we invested on average three times the capital investment per year, every year, than they had been previously investing in the business. And we built a $14 million brand new facility on top of that.

“At TAS, we have already dramatically increased the bonus incentive pool. In 2006, the bonus payouts at this company to all the personnel on the floor, not just executives, was $254,000. In our first year together, that number was exactly $342,000. In 2007, we put 14 percent of the company’s profitability back into the hands of the people that earned it. In a middle market company of this size, that’s a huge number.”

Connecting Technical Prowess
Listening to Tim Woodard talk of the transition, one hears the ‘whew’ factor. Townes relates that, if anything, the new owners have stepped up the pace. Responds Woodard, “That’s an understatement.”

“You don’t want to slam on the accelerator,” adds Townes. “A lot of little baby steps, but you just never stop. That has been our technique; it’s the whole secret, right there. This is going to be more of a five- or six-company consolidation, but it will have that same theme.”

The relocation of Integrated Flight Systems and Platinum Aviation Group to Meacham is expected to be concluded by March. The firms do helicopter mods, video systems, and air conditioning work.

Explains Townes, “Bringing them here to this depot-sized facility just makes sense; it makes it that much more technical cache that we’re offering here.

We will have other satellite operations and branches because of additional acquisitions, but if there’s a central them of what we’re doing at TAS, we’re going to make this a massive depot. This is going to be a showcase, technically deep, depot-quality facility by the time we’re finished.”

Woodard, who returned to TAS in 1991 after enriching his career at Lockheed, says he found a company that had eight people; was still struggling; but had depth of talent and capability. “They had been doing a lot of wholesale helicopter work for Bell and some of the other integrators in the area. The long suit of Texas Aviation was the avionics; and that was the weakest area that people in this area had.”

TAS became a Bell Service Center in 1992, and then made a heavy push into Latin America — a geographic sector that accounts for more than half the company’s revenues, says Woodard.

“My Dad and I focused on completions,” he explains. “Completions of new helicopters was the best piece of business that was out there.”

According to Townes, TAS recorded some 200,000 man hours of work in 2007, 25 percent of which was for a government contract. The other 75 percent came from civil completions and retrofits.

Says Townes, “Our goal here to build a $100-150 million rotorcraft services consolidation that is centered around this initial platform investment, but grows from there. It’s pretty transparent what we’re doing.

“From a customer perspective, they know that they’re going to get an increasingly larger depot of technical capacity here.”

And as with Keystone, the goal will be to sell the expanded ‘depot’ to an interest such as Sikorsky. “There’s no perfect time to sell a company,” comments Townes, “but it was a perfect time for Sikorsky because they really needed it. It was great for them and worked out really well for Keystone and for all the shareholders. The institutional equity had a 52 percent internal rate of return on their capital, which is phenomenal.

“All the guys up at Keystone kept their jobs, and it’s a centerpiece business unit of Sikorsky now.”

Woodard says that the intent to build and sell was told up front to all employees, at the first Townes-instituted town hall meeting. No one has since resigned, he says.

Projects Townes, “Now, let’s go down the road a bit. We will build this company up with aggressive investments; all kinds of new people. Then we’re going to hand it off to the biggest, strongest buyer we can find.

“This company is likely to be sold to a small handful of five or six potential strategic buyers. It’s either going to be a multibillion dollar helicopter operator or a multibillion aerospace consolidator.”