Soaring demand for air cargo service fuels AEI deal; THL said to merge logistics providers

Good morning, Hubsters. MK Flynn here with the Wire.

Air cargo. The global supply chain feels more vulnerable with each passing day, spurring private equity firms to invest in logistics companies.

This morning, AE Industrial Partners portfolio company Alpine Air Express, a regional air cargo carrier, unveiled the purchase of Suburban Air Freight.

“Growing e-commerce activity, faster delivery requirements and supply chain complexity has increased the demand for large scale, reliable regional air cargo service providers,” said Jon Nemo, senior partner at AEI. “We have invested significantly in Alpine, including this strategic addition of Suburban, to create a leading provider of critical air cargo infrastructure capable of meeting this growing demand.”

Headquartered in Provo, Utah, Alpine operates a growing fleet of more than 50 active aircraft and owns a proprietary Supplemental Type Certificate to convert the Beechcraft 1900D aircraft from passenger to cargo configuration. Customers include UPS, U.S. Postal Service and FedEx. Headquartered in Omaha, Suburban is a regional air cargo carrier that provides cargo services to DHL and others. Like Alpine, Suburban primarily operates a fleet of Beech 1900s.

The deal marks Alpine’s second acquisition since AEI bought the company in 2019. Alpine acquired the assets of Great Lakes Airlines in 2020.

More logistics deals coming. Another potential PE-backed logistics deal is in the news this morning. Thomas H. Lee Partners is reportedly combining two companies that provide technology to automate warehousing and shipping. The Wall Street Journal is reporting that MHS Global and Fortna are merging at a valuation of roughly $4 billion, according to a person familiar with the matter. A subsidiary of sovereign-wealth fund Abu Dhabi Investment Authority is investing new capital in the combined business for a significant minority stake, the person told the Journal. There’s no sign of the deal on the THL website or the wire services so far, but we’re keeping an eye out for a deal announcement.

Primary care. FFL Partners announced earlier this morning that it has invested in Perlman Clinic, an independent provider of primary care in the greater San Diego market. Aaron spoke with Chris Harris, managing partner at FFL, in an exclusive interview to discuss how the San Francisco PE firm plans to grow and scale the company during the holding period.

“We have been proactively focused on risk-based primary care for the past four years and the thesis for us has been based on the shift to providers taking [on] more risk,” Harris said.

Founded in 2005, Perlman Clinic is a full-service provider of comprehensive primary care, as well as urgent care, behavioral health and wellness services. The company operates 16 facilities staffed by more than 100 primary care providers across the greater San Diego region.

Pocketdoc, Perlman’s proprietary telemedicine platform, enables patients to schedule appointments and includes workflow software to help practitioners manage tasks such as insurance verification, payment processing and communication.

FFL plans to grow Perlman organically and through M&A, with several targets for potential acquisition already identified.

“If you step back and take a look at healthcare you think of what needs to happen – we need to provide better care at an overall lower cost to the system,” Harris said. “Primary care with a risk-based approach needs to play a critical role in accomplishing that goal. So, we see Perlman as very well-positioned for future growth.”

For more, read Aaron’s story.

Against the flow. Maine Public Employees Retirement System could reduce the target of its private equity allocation by 2.5 percent to meet a deadline originally set in the 1990s that requires it to eliminate its unfunded liabilities by the end of the decade, writes Buyouts reporter Gregg Gethard.

“The proposed reduction in PE is based on two factors: an increased need for liquidity related to the (unfunded actuarial liability) payoff, and the desire to maintain stable funded status and contribution rate volatility as the system approaches and becomes 100 percent funded,” said MainePERS chief investment officer James Bennett.

The move is unusual, Gregg points out. Many other US public systems are maintaining or seeking to increase their exposure to private equity. Just last month, a Commonfund survey revealed that LPs overwhelmingly believed that private equity would deliver the best returns over the next year when compared to other asset classes.

Investor relations. Tomorrow, PEI Media, the owner of PE Hub, will host our annual Investor Relations, Marketing & Communications Forum. I’m looking forward to kicking off the day by moderating the keynote panel on how the past two years have redefined the IR role. Panelists include Shavonne Correia, head of investor relations and marketing, KPS Capital Partners; Jennifer James, managing director, chief operating officer and head of investor relations and marketing, Thoma Bravo; Gina Lee Peyton, partner, capital formation, Castlelake; and Nathan Urquhart, partner and global head of investor relations, Carlyle.

Hope to see you there!

Chris will write tomorrow’s Wire, and I’ll be back on the Wire on Wednesday.

All the best until then,

MK