07:43 AM EST, 02/28/2022 (MT Newswires) -- Chorus Aviation (CHR.TO) overnight Sunday said it has agreed to acquire Falko Regional Aircraft Ltd, a regional aircraft lessor, for US$855 million, or about C$1.1 billion.
The transaction includes the purchase of Falko's asset management platform and equity interests in 1,263 owned and managed regional aircraft owned by funds managed by Fortress Investment Group LLC.
Chorus said the deal value comprises US$445 million of cash consideration, inclusive of agreed adjustments, and US$410 million of existing debt that will remain with the relevant target entities.
In connection with the acquisition, Canadian investment firm Brookfield (BAM-A.TO) and its institutional partners will invest US$374 million in Chorus. This comprises US$300 million of preferred equity and US$74 million of common equity.
The preferred equity will be non-convertible and will initially pay a dividend of 8.75% annually in cash, or 9.5% in kind, at Chorus' option, with step-ups after the sixth year. Brookfield will also nominate two directors to Chorus' board.
Chorus said the acquisition and the private placement to Brookfield are subject to applicable regulatory approvals and customary completion requirements, and are expected to close in the second quarter of 2022.
The combined company will have a total of 353 owned, operated, and managed regional aircraft. Upon closing, Chorus anticipates having 32 airline customers in 23 countries.
Joe Randell, President and CEO of Chorus, said the size and scale of the combined entity will enhance market opportunities as well as earnings stability. This transaction will be accretive to earnings and earnings per share in the first year," he said.