Monocle Acquisition Corporation, a blank check company, and Coral Gables, Florida-based AerSale Corp, a provider of aviation aftermarket products and services, have agreed to merge. The value of the transaction is about $430 million. The combined company will be named AerSale Corporation and trade on the NASDAQ. AerSale’s current backers include Leonard Green & Partners and Florida Growth Fund LLC.
NEW YORK and CORAL GABLES, Fla., Dec. 9, 2019 /PRNewswire/ — Monocle Acquisition Corporation (Nasdaq: MNCL), a public investment vehicle, and AerSale Corp. (“AerSale” or the “Company”), a leading integrated, global provider of aviation aftermarket products and services, today announced that they have entered into a definitive agreement to merge in a transaction with an implied enterprise value of approximately $430 million, equating to approximately 6.3x AerSale’s forecasted 2020 Adjusted EBITDA. The combined company, which will be named AerSale Corporation, will be publicly traded on the Nasdaq Stock Market.
AerSale, currently owned by Leonard Green & Partners, Florida Growth Fund LLC and the Company’s two founders, is a leading global supplier of aftermarket aircraft, spare engines, flight equipment, maintenance, repair and overhaul (MRO) services, and used serviceable material (USM) support. The Company also provides a broad range of internally engineered proprietary repairs, products, modifications, upgrades, and other cost-saving technical solutions. AerSale focuses on commercial aircraft and engines from their mid-life phase of operating service through asset retirement. By utilizing its highly integrated suite of asset management, maintenance and monetizing services, AerSale is able to realize the highest value of mid-life flight equipment investments, while also maximizing the value, reliability, performance and safety of customers’ aircraft and engines worldwide.
Headquartered in Coral Gables, Florida and with strategically located operating facilities, AerSale serves a growing global customer base. The Company’s management team, averaging approximately 25 years of directly related multi-disciplined industry experience, has established customer relationships across major airlines, cargo operators, MRO shops, OEMs, government entities, and aircraft leasing companies. Supported by proprietary aircraft, engine and component pricing, utilization and transaction data, unique fleet analytics, and a highly structured opportunity identification and valuation process, AerSale’s leadership has demonstrated financial success across economic cycles, and has well-positioned the Company to grow in the rapidly expanding commercial aviation aftermarket sector.
Under the terms of the merger agreement, which was unanimously approved by the boards of directors of both Monocle and AerSale, existing AerSale shareholders, including Leonard Green & Partners, will receive $250 million in cash and $150 million in newly issued common equity at closing, subject to adjustment to the mix of consideration under certain circumstances. The cash component of the purchase price is expected to be funded by Monocle’s cash in trust and the proceeds of an asset backed debt financing facility. Monocle has secured a commitment for this facility from Wells Fargo Bank, N.A. and PNC Bank, National Association, and may seek to raise additional capital through junior debt or other sources of debt financing. Under certain conditions, the parties have the option to reduce the cash consideration to not less than $200 million in exchange for the issuance of up to $50 million of convertible preferred equity to existing AerSale shareholders. In connection with the transaction and after closing, existing AerSale shareholders will also have the right to receive $33 million in additional value in stock consideration based on the post-closing share price performance.
Following the transaction, Leonard Green & Partners, Florida Growth Fund LLC and members of AerSale’s management team will continue to own approximately 42% of the outstanding shares of the combined company, subject to certain transaction closing assumptions. The remaining outstanding shares of the combined company will be held by public stockholders, including the founders of Monocle.
On a pro forma basis, AerSale expects to generate approximately $310 million in revenue and a 17.6% Adjusted EBITDA margin for the full year 2019. The Company forecasts significant revenue and Adjusted EBITDA growth over the next several years resulting from the increasing contribution of MRO products and services, the rollout of higher margin proprietary engineered products and services, the anticipated availability of attractively-priced retiring aircraft and engines for acquisition, increased penetration of the government and defense marketplace, improved operating leverage, and continuing M&A activity.
Following completion of the proposed transaction, AerSale will be led by its highly experienced management team, including Co-Founder, Chairman and Chief Executive Officer Nicolas Finazzo; Co-Founder and Executive Vice Chairman Robert Nichols; Division President of MRO Services Basil Barimo; Division President of Airframe & Engine Materials Gary Jones; Chief Technology Officer and Division President of Engineered Solutions Iso Nezaj; Division President of Aircraft & Engine Management Craig Wright; and Chief Financial Officer Martin Garmendia. It is anticipated that the Board of Directors of the combined company will be comprised of eight members: its two co-founders, Mr. Finazzo and Mr. Nichols; two members of the Monocle management team; one member from Leonard Green & Partners; and three additional independent directors.
Mr. Finazzo commented, “I am extremely proud of the business that our team has built over the past decade. A number of years ago, we recognized the competitive advantages of becoming fully integrated across the aviation aftermarket. To this end, we have progressively expanded into MRO services, and at the same time focused relentlessly on maximizing their integration with our asset management solutions business unit. We believe that today AerSale offers one of the broadest range of integrated aircraft asset management solutions and technical capabilities available to meet the expanding needs of aftermarket flight equipment stakeholders worldwide. Entering the public markets is an exciting step for our company, and we are eager to achieve this through our transaction with Monocle and our continuing relationship with Leonard Green & Partners. This transaction will undoubtedly benefit our customers, employees, shareholders, and suppliers, as we continue to expand our market share and further strengthen our reputation as a market leader in aviation aftermarket solutions.”
Monocle raised $172.5 million through an initial public offering (“IPO”) on February 11, 2019. During the IPO process, Monocle stated its intent to serve as a platform for consolidation and growth opportunities by partnering with companies in the aerospace & defense sectors. The Monocle founders – Eric Zahler, Sai Devabhaktuni and Richard Townsend – have extensive expertise in the aerospace & defense industry, and decades of experience operating and growing public companies in the sector.
Mr. Zahler, Chief Executive Officer and President of Monocle, commented, “AerSale aligns perfectly with the investment criteria we outlined throughout Monocle’s IPO process. The aviation aftermarket sector has proven resilient to economic cycles, and we believe presents a compelling opportunity for future growth. AerSale has created significant competitive advantages through regulatory streamlining, data capture and analytics, long-term customer relationships, and its integrated business model. We are acquiring this business at an attractive valuation relative to public aerospace peers, while providing significant potential to generate shareholder value over the near- and long-term.”
“AerSale provides Monocle a strong platform that we believe is scalable through sustained organic growth and disciplined M&A in a highly-fragmented sector of the aviation industry,” added Mr. Devabhaktuni, Chairman of Monocle. “We were immediately impressed by the AerSale leadership team’s deep industry expertise, broad industry relationships, and ability to foster a culture of excellence that has enabled the Company to establish meaningful competitive advantages. It is clear this company is ready for the public market, and that a public listing will provide an additional catalyst for accelerating growth. We look forward to working with AerSale’s leadership team to build on the Company’s attractive growth trajectory.”
Jonathan Seiffer, Senior Partner at Leonard Green & Partners, added, “Since our initial investment in AerSale, we have fully supported management in executing our shared vision to create an integrated provider of aviation aftermarket products and services. Today, AerSale is a global business with a demonstrated ability to scale quickly and efficiently. We believe the future remains very bright for the company under this new structure, and we are excited to continue supporting the highly experienced combined team as it pursues a wide range of new growth opportunities.”
Monocle believes the proposed transaction presents a compelling investment opportunity for shareholders in several ways, including the following:
Well-positioned in the resilient and rapidly expanding commercial aviation aftermarket;
Maximizes return on investment through a differentiated and integrated business model, leveraging a broad range of “Nose to Tail” aftermarket products, services and technical solutions;
Long-standing relationships with constituents across the value chain to support procurement and monetization of assets;
Multiple levers for sustained organic growth across existing and new business lines;
Scalable platform for growth through M&A, with a demonstrated ability to acquire and integrate businesses;
Proven leadership team with deep industry expertise across multiple aviation business cycles; and
Business combination at an attractive valuation relative to public commercial aerospace aftermarket peers.
Completion of the transaction, which is expected in the first half of 2020, is subject to Monocle shareholder approval and other customary closing conditions.
Monocle is being advised by PJT Partners; Cowen; Cadwalader, Wickersham & Taft LLP; Greenberg Traurig, LLP; and Alton Aviation Consultancy. AerSale is being advised by RBC Capital Markets; Harris Williams and Latham & Watkins LLP.
Monocle and AerSale will host a teleconference regarding the proposed transaction on Monday, December 9, 2019, at 10:30 am ET. The teleconference and accompanying slide presentation can be accessed by visiting https://event.on24.com/wcc/r/2154390-1/A2D2AFD31A767E1FF8CF3D45AE919BA8. The teleconference can also be accessed by dialing +1 (866) 342 8591 or +1 (203) 518 9713 and providing the conference ID 120919 or asking for the Monocle/AerSale teleconference.
A replay will be available beginning on December 9, 2019 at 12:30 p.m. ET. The replay can be accessed at the same link as the teleconference.
About Monocle Acquisition Corporation
Monocle Acquisition Corporation is a public investment vehicle formed for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization, or similar business combination with one or more businesses with a focus in the aerospace and defense sectors.
About AerSale Corp.
A global aviation leader celebrating its 10-year anniversary, AerSale specializes in the sale, lease, and exchange of used aircraft, engines, and components, in addition to providing a broad range of maintenance, repair, and overhaul and engineering services for commercial aircraft and components. AerSale also offers asset management services to owners of end-of-life aircraft and engine portfolios. For more information, please visit www.aersale.com.
About Leonard Green & Partners
Leonard Green & Partners, L.P. is a leading private equity investment firm founded in 1989 and based in Los Angeles. The firm partners with experienced management teams and often with founders to invest in market-leading companies. Since inception, LGP has invested in over 90 companies in the form of traditional buyouts, going-private transactions, recapitalizations, growth equity, and selective public equity and debt positions. LGP primarily focuses on companies providing services, including consumer, business, and healthcare services, as well as retail, distribution, and industrials. For more information, please visit www.leonardgreen.com.