Renatus Weekly M&A & Company Performance Newsletter 14/03/2021

Deal Details: Leading aircraft lessor AerCap has announced a definitive agreement with General Electric to acquire GE Capital Aviation Services (GECAS) in a deal worth around €25bn.

The deal, which is subject to regulatory approval, is expected to close in Q4 2021.

Dublin-based and NY-listed AerCap is the global leader in aircraft leasing. It serves approximately 200 customers in c. 80 countries with comprehensive fleet solutions.

GECAS is an Irish–American commercial aviation financing and leasing company. A subsidiary of GE Capital, GECAS is the finance arm of the conglomerate General Electric.

Under the terms of the transaction agreement GE will receive 111.5 million newly issued AerCap shares, $24bn of cash and $1bn of AerCap notes and/or cash.

The combined company will retain the name AerCap while GECAS will become a business of AerCap. It’s more than 400 employees will transfer to AerCap upon completion of the transaction.

The combined company will be an industry leader across all areas of aviation leasing, with over 2,000 owned and managed aircraft, over 900 owned and managed engines, over 300 owned helicopters and approximately 300 customers around the world.

The combined company’s 2,000 jets would represent 7% of the world’s commercial fleet, according to analysts at Jefferies.

Advisers: KMPG supported AerCap on this transaction. Citi and Morgan Stanley acted as financial advisors to AerCap. Cravath, Swaine & Moore LLP, NautaDutilh NV and McCann Fitzgerald acted as legal advisors to AerCap.

PJT Partners LP, Goldman Sachs, and Evercore acted as financial advisors, and Paul, Weiss, Rifkind, Wharton & Garrison LLP, Clifford Chance LLP, and A&L Goodbody acted as legal advisors to GE on the transaction.

Renatus Comment: Difficult market conditions can often lead to consolidation and can create circumstances for major M&A that would not be possible in more normal times. The global 2008 recession led to a high degree of consolidation within the financial sector which was at its centre, examples include JP Morgan acquiring Bear Stearns and Bank of America acquiring Merill Lynch, among others. It is often the case of the less wounded rival acquiring the other.

Today, the aviation sector is at the centre of a similar crisis with the prolonged and global shuttering of air travel.

By being the less wounded and more ambitious rival, AerCap will now become the biggest aircraft lessor in the world.

With the acquisition, Ireland’s aircraft leasing sector continues to grow and cement its position as a global leader. For context, between 2009 and 2018 the assets of the aircraft leasing sector rose by €96.9 billion, from €43.2 billion in 2009 to €140.1 billion in 2018, which is the most recent year for CSO stats.

More than 50% of the total leased aircraft globally are controlled from Ireland. Leasing has grown from being a fraction of the total aircraft market in the 80s and 90s to today owning 40%+ of the total global commercial aircraft market.

Source: AerCap

Advisers: John-George Willis of Tughans Solicitors, supported by Aimee Craig, Orla Drayne, Gavin Robinson, Paul Eastwood and Jack Balmer advised Rainbox Communications on the legal side of the transaction.

Paul Mc Cann and his colleagues at Maneely Mc Cann Chartered Accountants provided financial advice to the sellers.

Renatus Comment: Radius Payment Solutions have been on an aggressive M&A spree in recent times. The Rainbow Communications acquisition being their 8th telecommunications acquisition in the past 2 years. Radius began as a fuel cards solution provider but is now a diversified, global business with solutions across telematics, insurance, electric vehicles and now communications. Today the business has more than 23 offices in 15 countries. This growth was largely achieved through a consistent and aggressive M&A approach.

Source: Rainbow Communications

Deal Details: Belfast-based herbs and spice producer FAVOURIT Foods is acquired by brand-building distributor GM Marketing for an undisclosed sum.

FAVOURIT, founded in 1914, is Northern Ireland’s oldest manufacturer of Herbs & Spices, supplying Irish retail and foodservice sectors for over one-hundred years with quality food ingredients.

GM Marketing operates across UK and Ireland. It is focused on core grocery categories, and home to household names such as Tilda Rice, Fox’s Biscuits and Nando’s sauces, as well as a growing owned brand portfolio.

Advisers: Belfast-based Worthingtons Solicitors team including partner Catherine Cooney and solicitors Amira Graham and Michael Press advised GM Marketing.

Renatus Comment: GM Marketing’s business model is to take over brands which they believe are underperforming and apply their internal best practices to help them grow. By leveraging their processes around sales, marketing, supply chain, distribution and financing, GM Marketing have been able to create a portfolio of brands which they have extracted greater value from than the incumbent owners have.

FAVOURIT foods have been in operation since 1914 and may well benefit from GM Marketing’s ownership. It will be interesting to follow the story.

Source: GM Marketing

Deal Details: Aedifica, a specialist healthcare investor, has acquired a group of four elderly residential care homes in south-east Ireland, for €26.5m by way of share acquisition.

Aedifica, with a portfolio of over 500 sites across Belgium, Finland, Germany, Ireland, the Netherlands, Sweden and the UK, is valued at over €3.8bn.

Aedifica entered the Irish market in February, when it acquired Bridhaven nursing home, the largest private elderly residential care home in Ireland, for €25m.

The 4 care homes with a total capacity of 233 residents are located in Waterford, New Ross, Bunclody, and Killerig.

Advisers: A Simmons & Simmons team led by corporate partner David Brangam and real estate partner Peter McKeever advised Aedifica on both this latest acquisition and the Bridhaven deal.

Renatus Comment: According to a Bank of Ireland report “BOI Sectors Team – 2020 Insights and 2021 Outlook Feb 2021”, there are 572 nursing homes with 32,067 beds in Ireland, up 98 beds year-over-year. Interestingly, c. 30% of  nursing homes are now owned by Irish and international investors and funds. There are over 400 private and voluntary nursing homes in Ireland according to Trinity Care. There has been consolidation in the market this year with 52% of the private homes now in groups of two or more; this is up from 36% in 2020.

This has been a number of notable transactions in the space recently including Cardinal Capital Ireland’s purchase of Mowlam Healthcare Group, Infravia Capital’s purchase of Newtownparkhouse through CareChoice, among others.

By 2036, our over 80 population is projected to increase from 170k in 2020 to 343k. This will place pressure on a market where there is already excess demand. We should expect to see further transaction activity by domestic and international funds as they provide the capital to support the development of adequate facilities over the coming years.

You can view Bank of Irelands report here

Source: Aedifica Press Release

Deal Details: ARYZTA AG has announced it has signed a definitive agreement to sell 100% of the equity and assets of its North American business in the USA and Canada to an affiliate of Lindsay Goldberg LLC, a US private equity company, for a total enterprise value of USD850m in cash.

The cash sale, which involves 15 facilities and 4,000 employees, is expected to be completed by the end of July, subject to regulatory approval. This division accounted for €1.26bn of Aryzta revenue and earnings of €67m in its financial year 2020. The group’s North American business includes artisan bread brand La Brea, cookie and muffin brand Otis Spunkmeyer and Fresh Start bakeries, which was previously owned by Lindsay Goldberg.

Aryzta will publish its half year results, tomorrow the 15th of March.

In its most recent full financial year to December 2020, Aryzta reported revenue of c. €2.9bn and EBITDA of c. €260m.

Advisers: ARYZTA was advised on the transaction by Houlihan Lokey and Alantra, Goodwin Procter, Homburger and KPMG.

Renatus Comment: The Aryzta story over the past couple years has been fascinating. It has faced investor pressure for its performance in the US, its climbing debt and its capital structure which left the business at a pivotal cross roads.

Last year it resisted an attempted takeover by US hedge fund Elliott, which had valued the group at €734 million. It decided that the company was better off staying independent and following a strategy of simplifying the business and selling off non-core assets to reduce its debt. Selling a single business unit here for $850m appears to have validated this.

Before this deal was announced, Aryzta closed trading on the Swiss stock exchange with a market cap of c. CHF 955m (€861m) and a share price of 0.96CHF. In January of 2017, the share price was as high as 9.67 CHF.

Source: Aryzta, RTE, Irish Times

Deal Details: Irish agri-services group Origin Enterprises PLC has agreed a deal to acquire UK-based Green-tech Limited for an undisclosed sum.

Dublin-based Origin is a focused agri-services group providing specialist on-farm agronomy services, digital agricultural services and the supply of crop technologies and inputs.

Green-tech is the UK’s leading supplier of quality soft & hard landscaping materials, tree planting products & wholesale garden supplies.

Origin Enterprises reported an operating profit of €1.2m for the six months to the end of January.

Advisers: Advisers to Origin include Goodbody, Davy and Numis Securities.

Renatus Comment: In its financial year to September 2019, Greentech Ltd reported revenue of c. €16.4m and EBITDA of c. €1.2m.

In its year to July  2020, Origin reported revenue of c. €1.6bn and operating profit of c. €44m. At the close of trading on Friday, Origin had a market cap of c. €452m.

Origin has been expanding its horizons in recent times, it acquired a Brazilian crop nutrition company in 2018 to expand its geographical reach and tap into Brazil’s booming agri sector. Here it has acquired an equipment manufacturer in Green-tech which will expand its product offering into machinery manufacturing which was traditionally not a core revenue line but will provide intuitive cross-selling opportunities given its customer base.

Source: RTE

Deal Details: Monaghan-based Avail Support has been acquired by US-based CentralReach. The financial consideration was not disclosed.

Avail Support enables individuals to combine Applied Behavioural Analysis (ABA) tools, evidence-based interventions and technology to create an interactive online platform, providing virtual support for people with learning disabilities such as Autism, Down Syndrome, Brain Injuries and other cognitive related disabilities. The platform provides personalised learning plans, assessments and progress reports using smart devices.

Florida-based CentralReach offers software and services to help applied behaviour analysis practitioners manage their practices. It has 100,000 users that serve more than 200,000 neurodiverse clients.

No financial consideration as disclosed, and the Orthoderm founders Michael and Elizabeth Eames will remain as Directors of the business.

Advisers: None mentioned

Renatus Comment: Avail’s products fall under the category of assistive technology which is a great example of technology for good which can have a real positive societal impact. Technologies such as Avail’s have gained new significance in our socially distanced, Covid world where in-person teaching, training, engagement, and other activities which are so necessary have become more difficult.

Source: The Sunday Times