Chorus Aviation said it has agreed to sell its regional aircraft leasing (RAL) segment in a deal valued at about $1.9 billion.
The agreement includes Falko Regional Aircraft Limited, a lessor that serves a global clientele of airlines with regional jets and turboprops.
“We are pleased to announce this transaction, which is a catalyst for unlocking the embedded equity value in our RAL segment,” said Colin Copp, president and chief executive officer of Chorus.
“This is a compelling transaction for shareholders with net proceeds representing a significant premium to the implied market value of the segment and at a price consistent with the trading multiples of our aircraft leasing peers.”
The agreement includes $814 million in cash, net of estimated transaction expenses, and $1.1 billion in the form of aircraft debt to be assumed or prepaid by the buyer at closing, as well as the value of the non-controlling interest, Chorus said.
“This transaction will allow us to significantly reduce our debt and corporate financings, leaving Chorus with strong and predictable free cash flows from our long-term contracts,” said Copp.
“That will enable us to implement a sustainable return of capital program for our common shareholders and invest in future growth. We will leverage our deep operational expertise and capabilities to focus our growth on aviation services, as demonstrated by recent growth in Voyageur’s business.”
Brookfield, a global investment firm that holds about 13.2 percent of Chorus’ outstanding common shares, said it supports the decision, noting it “allows the company to execute on its strategic plans.”
Air Canada owns about 8.1 percent of Chorus’ outstanding common shares and has also signed a voting support agreement with the buyers. Both Brookfield and Air Canada are expected to retain representatives on the Chorus board of directors after the sale.
The transaction is subject to approval by at least two-thirds of the votes cast by Chorus’ common shareholders, and is expected to close by the end of 2024.