ACE Aviation to sell 70 pct of maintenance unit

By Scott Haggett

CALGARY, Alberta (Reuters) - ACE Aviation Holdings Inc. (ACEa.TO: Quote, Profile, Research, Stock Buzz)(ACEb.TO: Quote, Profile, Research, Stock Buzz) agreed on Friday to sell a major stake in its maintenance division to Sageview Capital LLC and an affiliate of Kohlberg Kravis Roberts & Co.KKR.UL.

ACE, the parent company of Air Canada (ACa.TO: Quote, Profile, Research, Stock Buzz), will sell 70 percent of its Air Canada Technical Services (ACTS) unit to the consortium, agreeing to hold the remaining stake and stay as the unit's biggest customer.

ACE did not disclose the price paid by Sageview and KKR Private Equity Investors LP (KKR.AS: Quote, Profile, Research, Stock Buzz). However it did say the deal for the 70 percent stake put a total enterprise value of about C$975 million ($911 million) on ACTS on a cash and debt free basis.

"It's definitely a fair price," said Cameron Doerksen, an analyst at Versant Partners in Montreal. "It's ... in line with what other companies have been taken out for in the aerospace after-market space."

KKR Private Equity Investors is a publicly traded fund and an affiliate of Kohlberg Kravis Roberts & Co., one of the world's largest buyout firms. Long seen as a front runner to acquire ACTS, New York-based KKR is also one of the potential bidders looking to acquire BCE Inc. (BCE.TO: Quote, Profile, Research, Stock Buzz), Canada's biggest telecoms company

Sageview Capital, which manages more than $1 billion in assets, was formed last year by two former KKR partners.

"We saw an opportunity to carve out the business, put in capital, and grow it," said Scott Stuart, one of Sageview's founding partners, in an interview with Reuters. Stuart said key to Sageview's approach to the ACTS deal was his experience at KKR on the purchase of ITC Holdings, a transmission line carve-out from DTE Energy. Acquisitions are part of the firm's growth plans, he said.

The deal allows the new owner to win business from Air Canada competitors, a strategy it previously was unable to pursue.