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Babcock launches $1.8 billion rights issue to buy helicopter firm Avincis
March 27, 2014 / 7:45 AM / 4 years ago

Babcock launches $1.8 billion rights issue to buy helicopter firm Avincis

LONDON (Reuters) - Engineering contractor Babcock (BAB.L) said on Thursday it had agreed to acquire helicopter transport services firm Avincis for 920 million pounds ($1.5 billion) plus debt, funding the long-expected deal through a 1.1 billion-pound rights issue.

Babcock will take on net debt at Avincis of 705 million pounds.

“This is a really good deal for us, this is a Babcock-type business with big complicated customers, where services are absolutely critical,” Chief Executive Peter Rogers told Reuters.

“It’s technical, the engineering is pretty sophisticated and it takes us into markets outside the UK which are very valuable to us, potentially over the next few years,” he added.

The deal give the FTSE 100 <0#.FTSE> firm which began an international expansion drive three years ago access to potentially lucrative defense contracting markets, particularly in Spain and Italy.

Rogers said he plans to add to the business over the next few years but his first priority is to ensure it continues to deliver growth.

“We won’t do anything of significance in terms of size for the next two years while we make sure this is bedded in properly. At this stage, the operational issues now take priority,” he said.

London-headquartered Avincis runs a fleet of 356 aircraft, of which 196 are owned by the company, and operates in 10 countries. It has about 3,000 employees.

Avincis is being sold by World Helicopters, a portfolio company owned by investment funds affiliated with Investindustrial and Kohlberg Kravis Roberts (KKR.N).

Shares in Babcock were down 4.6 percent at 1303 pence by 0852 GMT, making it the bigger loser in the FTSE 100 .FTSE.

The fully underwritten rights issue offers shareholders five new shares at 790 pence a share for every 13 shares held.

A source familiar with the matter said that KKR reckons the sale gives it a money market multiple of close to 2.5 times its original investment, made in 2010, in line with expectations, and a percentage internal rate of return (IRR) in the mid-20s.

“The key risks to our minds would be the lack of cost synergies in this transaction to help reduce the risk,” said Panmure analyst Mike Allen.

($1=0.6037 British Pounds)

Additional reporting by Freya Berry; Editing by Kate Holton and Greg Mahlich

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