KKR is not holding back. It closed its $4.475bn acquisition of FBO chain Atlantic Aviation on September 23rd. Less than two months later it has agreed a merger between Atlantic and Ross Aviation. Ross Aviation operates 19 FBOs across the United States and the Caribbean joining almost 70 Atlantic FBOs.
The deal is a great fit. Not only do the two management teams know and like each other, but KSL and KKR have invested together for more than 30 years. In August the two private equity companies sold luxury resort company Apple Leisure Group to Hyatt. When the acquisition of Atlantic was announced, KKR and KSL started talks about Ross Aviation.
Ross Aviation and KSL were advised by investment bank Jefferies LLC and Harris Williams. Jefferies also advised KKR on its acquisition of Atlantic Aviation and led the acquisition financing, which saw strong demand from debt investors.
This is the third time that Ross Aviation’s founder Jeffery Ross has sold an FBO chain. But he is staying with the company. “Ross Aviation has been fantastic at growing and operating its portfolio and the fact that they are staying is a huge plus for Atlantic going forward,” said Nick Fazioli, Jefferies’ MD and head of Commercial Aerospace and Aviation. “The team have a long history of operating and acquiring FBOs.”
A Macquarie Infrastructure fund owned Atlantic for 17 years. It started selling Atlantic Aviation in late 2019 – with KKR a first round bidder – but Covid delayed the sale until June 2021.
At least one other significant FBO acquisition is expected to be announced in the next few weeks. Even without this, the last year has seen record investment. Blackstone, Global Infrastructure Partners, and Cascade Investments took the largest FBO chain Signature Aviation private in a $4.7bn deal in June. Modern Aviation, an FBO chain backed by Tiger Infrastructure has acquired five New York FBOs from Sheltair; and Hill Aviation, a Puerto Rico FBO company. A Macquarie fund also bought London Farnborough Airport in October 2019.
“There is a lot of new investment coming into FBOs,” says Timothy Obitts, president and CEO of the – National Air Transport Association. “New investors are not looking at the industry as a short-term play but looking long-term and investing in infrastructure.” Obitts says that in the past the focus was on location, potential fuel sales, hangar leases and cost synergies with other FBOs.
As well as Atlantic, KKR also invested $40m in Jet Edge in September.
“This is a unique period for business aviation investment. We are receiving interest from investors and strategic buyers across the whole industry – FBOs, operators, suppliers,” says Fazioli. “There is real sentiment that business aviation is a sector with a great future.”
This gives sellers a dilemma. If they sell now (when the market is hot) do they miss out on growth?
Image courtesy of Ross Aviation.