(NYSE: CAE; TSX: CAE) – CAE has agreed to acquire Bombardier’s
Business Aircraft Training (BAT) business for an enterprise value
of US$645 million, expanding its ability to address the training
market for customers operating Bombardier business jets, which at
more than 4,800 aircraft, is one of the largest and most valuable
in-service fleets of business aircraft in the world. The
acquisition will also serve to expand CAE’s position in the largest
and fastest growing segment of the business aviation training
market, involving medium- and large-cabin business jets. The
acquisition provides CAE with talented people, a portfolio of
customers, and an established recurring training business which is
highly complementary to CAE’s network. The Bombardier BAT business
includes a modern fleet of full-flight simulators (FFSs) and
training devices covering the Learjet, Challenger and Global
product lines, including the latest large cabin Global 5500, 6500
and 7500 business jets.
In its first full year following the closing of
the transaction, the acquisition will provide CAE high single-digit
percentage earnings accretion and will be accretive to free cash
flow(2). It is also expected to be accretive to CAE’s Civil segment
operating income (SOI)(3) margin by approximately 100-150bps.The
acquisition enterprise value of Bombardier’s BAT business
represents a multiple of approximately 9x one-year Forward
EBITDA(1). The EBITDA(1) is expected to grow at a double-digit
pace; driven by demand from the existing large installed base of
Bombardier business jet operators; and the ramp up of recent and
already planned FFS deployments. The acquisition of Bombardier’s
BAT business is subject to regulatory approvals and is expected to
close by the second half of calendar year 2019.
In addition to the agreement to acquire
Bombardier’s BAT business, CAE has agreed to pay US$155 million to
monetize its existing future royalty obligations under the current
Authorized Training Provider (ATP) agreement with the business jet
manufacturer. This also involves the extension of CAE’s ATP
agreement to 2038. The monetization represents the discounted sum
of royalties payable by CAE over the next 20 years, and the
transaction is expected to close by the end of CAE’s current fiscal
year.
In view of the expected timing of the
transactions, CAE’s outlook for its current fiscal year 2019
remains unchanged.
The transactions are aligned with CAE’s capital
allocation strategy, to balance growth investments with cash
returns to shareholders, while maintaining CAE’s investment grade
profile and a target return on capital employed(4) of 13
percent by fiscal year 2022.
“CAE is the largest independent Civil aviation
training company in the world, and we are proud to support the many
business aircraft operators, airlines, and aircraft manufacturers
who rely on CAE as their partner of choice for the most
comprehensive and innovative training solutions,” said Marc Parent,
CAE’s President and CEO. “This transaction represents a win-win for
both companies, resulting in enhanced core focus. We look forward
to having increased addressability in the large market of
Bombardier business jet operators, and to providing customers with
a world-class training experience. Market fundamentals in
business aviation are strong and the business we are acquiring is
well-supported by a large installed base. We are expanding our
position in the largest and fastest growing segment of business
aviation training at an opportune time.”
Marc Parent added: “We welcome the
highly-talented employees of Bombardier Business Aircraft Training.
We value your expertise and customer focus; as part of the CAE
team, you will continue to provide best-in-class training to pilots
and technicians for Bombardier business aircraft.”
The Bombardier BAT business will be integrated
smoothly with CAE since its operations are already co-located
within CAE’s Dallas and Montreal training centres. Once integrated,
Bombardier business jet operators will have even broader access to
training, with a total of seven CAE business aviation training
locations worldwide.
With this agreement, CAE will be adding 12
Bombardier business aviation full-flight simulators to its training
network (including one deployment already planned for CAE’s fiscal
year 2021), for a total of 29 business aviation FFSs available for
training worldwide, with further growth planned in the near- to
mid-term. CAE operates more than 80 business aviation full-flight
simulators in its training network.
The acquisition increases CAE’s ability to
address the long-term and growing market demand for business
aviation professionals. CAE estimates that there will be a need for
50,000 new business aviation pilots over the next 10 years (Source:
CAE’s 2018 CAE Airline and Business Jet Pilot Demand Outlook,
available for download at www.cae.com/civil-aviation).
CAE is financing the acquisition with a
combination of cash on hand, drawing on its existing bank facility
and new committed term loans.
TD Securities acted as exclusive financial
advisor to CAE.
Presentation slides This press
release is accompanied by presentation slides which are accessible
via CAE’s Investors page at www.cae.com/investors/
Conference call for financial analysts
and media CAE will host a conference call and live webcast
to discuss the acquisition today at 7:15 a.m. ET. The webcast will
be accompanied by presentation slides which are already available
at http://www.cae.com/investors/. The call is intended for
financial analysts and institutional investors and will be followed
by a media Q&A. Participants can listen to the conference call
by dialing 1-877-586-3392 or + 1-416-981-9024. The webcast will be
accessible on CAE’s Investors page on www.cae.com/investors/ or at
http://www.gowebcasting.com/9793.
About CAECAE is a global leader
in training for the civil aviation, defence and security, and
healthcare markets. Backed by a record of more than 70 years of
industry firsts, we continue to help define global training
standards with our innovative virtual-to-live training solutions to
make flying safer, maintain defence force readiness and enhance
patient safety. We have the broadest global presence in the
industry, with over 9,000 employees, 160 sites and training
locations in over 35 countries. Each year, we train more than
120,000 civil and defence crewmembers and thousands of healthcare
professionals worldwide. www.cae.com
Follow us on Twitter @CAE_Inc
Cautionary note regarding forward-looking
statementsThis news release contains forward-looking
statements and information within the meaning of applicable
Canadian securities laws and of the United States Private
Securities Litigation Reform Act of 1995, including, without
limitation, as it relates to our proposed acquisition of
Bombardier’s BAT business as referenced herein, as well as certain
expectations with respect to the same. Forward-looking statements
describe future expectations, plans, results or strategies and can
often be identified by the use of words such as “may,” “will,”
“intend,” “believe,” “expect,” “anticipate,” and similar references
which are intended to identify forward-looking statements.
Statements in this news release, other than statements of
historical fact, are forward-looking and are subject to important
risks, uncertainties and assumptions. The results or events
predicted in these forward-looking statements may differ materially
from actual results or events. These statements do not reflect the
potential impact of any non-recurring or other special items or
events that are announced or completed after the date of this news
release, including mergers, acquisitions, or other business
combinations and divestitures.
Specific risks and uncertainties relating to the
transaction described in this news release include, but are not
limited to: the completion of the proposed acquisition may not
occur on the anticipated terms and timing or at all; the required
regulatory approvals may not be obtained; potential adverse
reactions or changes to business relationships resulting from the
announcement or completion of the proposed acquisition; the
potential impact of unforeseen liabilities on the future prospects,
business and management strategies for the management, expansion
and growth of our operations after the consummation of the proposed
acquisition; the risks and costs associated with, and our ability
to, integrate Bombardier’s BAT business successfully and to achieve
anticipated synergies; and management’s response to any of the
aforementioned factors.
You will find more information about the risks
and uncertainties associated with our business in the MD&A
section of our annual report and annual information form for the
year ended March 31, 2018. These documents have been filed with the
Canadian securities regulatory authorities and are available on our
website (www.cae.com), on SEDAR (www.sedar.com) and a free copy is
available upon request to CAE. They have also been filed with the
U.S. Securities and Exchange Commission under Form 40-F and are
available on EDGAR (www.sec.gov). The forward-looking statements
contained in this news release represent our expectations as of the
date of this news release and, accordingly, are subject to change
after this date. We do not update or revise forward-looking
information even if new information becomes available unless
legislation requires us to do so. You should not place undue
reliance on forward-looking statements.
Non-GAAP and other financial measures
This news release references certain non-GAAP
and other financial measures. Management believes these non-GAAP
financial measures will provide investors with useful supplemental
information about the financial performance of our and the proposed
acquisition’s business. Non-GAAP measures are useful supplemental
information but may not have a standardized meaning according to
GAAP. These measures should not be confused with, or used as an
alternative for, performance measures calculated according to GAAP.
They should also not be used to compare with similar measures from
other companies. Management believes that providing certain
non-GAAP measures provides users with a better understanding of our
results and trends and provides additional information on our
financial and operating performance.
(1) EBITDA: earnings before net finance expense,
income tax expense, amortization and depreciation.
(2) Free cash flow: net cash generated by
continuing operating activities, less maintenance capital
expenditures, investment in other assets not related to growth and
dividends paid, plus proceeds from the disposal of property, plant
and equipment, dividends received from equity accounted investees
and proceeds, net of payments, from equity accounted investees.
(3) Segment operating income (SOI): operating
profit excluding the impact of restructuring, integration and
acquisition costs.
(4) Return on capital employed: rolling
four-quarter period net income attributable to equity holders of
the Company excluding net finance expense, after tax, divided by
the average capital employed.
Refer to the definitions in this news release and to “Section 5
- Non-GAAP and other financial measures” in our first quarter ended
June 30, 2018 MD&A for more details, available on our website
(www.cae.com) and under our profile on SEDAR (www.sedar.com) and
EDGAR (www.sec.gov).
CAE contacts:
General Media:Hélène V. Gagnon,
Vice President, Public Affairs and Global Communications,
+1-514-340-5536, helene.v.gagnon@cae.com
Investor relations: Andrew Arnovitz, Vice
President, Strategy and Investor Relations,+1-514-734-5760,
andrew.arnovitz@cae.com
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