Private-equity company to buy CHC for $3.7 billion

Aviation International News » April 2008
March 28, 2008, 10:41 AM

CHC Helicopter, the world’s largest provider of helicopter services to the offshore oil and gas industry, is being sold for $3.7 billion in what company officials describe as “the largest oilfield services buyout ever.”

The buyer is First Reserve, a Greenwich, Conn.-based private-equity company. In addition to $1.46 billion in cash, the firm will assume $1.48 billion in aircraft liabilities and about $779 million in debt.

CHC operates 250 aircraft in 35 countries. Almost 70 percent of the company’s revenue comes from the offshore sector. The company is the leading offshore service provider in the North Sea, operating from 17 bases in the region.

CHC recently had the rating lowered on its $400 million debt by major credit agencies. Analysts cited the company’s rapid expansion and aggressive helicopter acquisition strategy as points of concern. The company increased the size of its fleet by 10 percent last year and has 85 new helicopters on order, many of them medium and heavy twins. The First Reserve acquisition is expected to allay these concerns.

From the CHC shareholder’s view, the transaction means First Reserve will pay $32.30 per share for the company, a considerable premium over CHC’s price of $21.63 a share at close of trading on February 24, the day before the deal was announced. By the close of trading on February 25, the price per share had risen to $29.93. As of mid-March, the price was hovering just under the $31-per-share mark.

“I’m glad to see that First Reserve recognized the value that was created in CHC over the years and was able to translate that value into a fair offer for all shareholders,” said CHC chairman Mark Dobbin.

The estate of the late Craig Dobbin, who founded CHC Helicopters in 1984, holds the largest block of shares in the Vancouver, British Columbia-based company. When its founder died in October 2006, there was speculation then that the family might divest itself of its interest in CHC. However, according to CHC president and CEO Sylvain Allard, “There was no intent at the time to sell CHC [although Dobbin’s death] certainly triggered a lot of outside interest.”

That interest dwindled until late last year, leaving First Reserve to return to the table as the only suitor. “When you get an offer by a company like First Reserve, you have to consider it [and] they knocked on the door often enough to convince the board,” said Allard. First Reserve, a buyout group with $12 billion under management, is a major investor in the energy field.

The CHC board has unanimously approved the acquisition and has recommended that its shareholders vote in favor of it. However, the Dobbin estate holds roughly 63 percent of “overall votes,” suggesting that stockholder approval is a foregone conclusion. According to a CHC spokeswoman, the vote is scheduled for April 29. The deal must be approved by not only CHC shareholders but also the Supreme Court of British Columbia, Transport Canada and the European Union.

Allard expects the acquisition to be completed by June, pending the satisfaction of all conditions, including regulatory approvals. In the meantime, he added, CHC considers the subsequent period a “no-shop” time during which the company will not solicit counter bids.

However, it isn’t a “done deal” and CHC can terminate it under certain circumstances. Among them is “a superior proposal that would be subject to fulfillment of certain conditions,” including payment to First Reserve of a $38.05 million break-fee.

CHC management, including Allard, is expected to remain in place after the transaction closes. “The structure and mandate of the company remain the same,” he explained. Mark Dobbin, however, will leave his post as chairman of the board as the family divests itself of all interests in CHC.

Suggesting that the acquisition is a springboard to further expansion by CHC, Allard described the transaction as a “partnership that will help us realize our growth potential.”

Referring to the familiar CHC company logo, Allard said emphatically, “You’ll see the hummingbird fly for a long time to come.”

Mark Huber contributed to this article.

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