Directional Capital buys Flexjet: an unsually rational deal for buyer, seller and the industry
It is well known that most mergers and acquisitions fail. But the sale of Flexjet to Kenn Ricci’s Directional Capital makes a lot of sense to the buyer, the seller and the industry.
As the founder of Flight Options, Kenn Ricci clearly knows how to make money from running a fractional aircraft company and having bought Sentient last year, he thinks now is a good time to invest in business aviation. It has not been public, but Directional was also the underbidder for Marquis Jet (NetJets was not keen on this idea) and it also talked to Cessna about acquiring Citation Air (the barrier here is rumoured to have been residual value guarantees).
Selling Flexjet makes sense for Bombardier Aerospace, whose main business is building and supporting aircraft. As part of the acquisition, Flexjet will order 85 business jets, including Challenger 350, Challenger 605, Learjet 75 and Learjet 85 aircraft. The agreement also includes options for an additional 160 business jets. Bombardier is saying that Flexjet could order up to 245 aircraft (although it probably will not take this many) and that this would be worth $5.2 billion if Flexjet pays list price (which it definitely will not do).
Flexjet effectively came on the market in 2011 when NetJets signed its first order with the manufacturer. When it ordered again in June last year the sale looked even more certain. The only question was who would buy it (it was so obvious that even I wrote about this in March). At the time we did ask Thomas Flohr, the founder of VistaJet if he was interested but they have chosen to enter the US using Jet Aviation as a manager.
It is amazing how quickly the fractional aircraft market has consolidated. Since 2008 we have gone from five operators to two (although the Flexjet brand will survive and it will be operated as a separate company). It has taken US airlines far longer to work this out.