Erickson Air-Crane Inc.
) has entered into a stock purchase agreement with Evergreen
International Aviation, Inc. ("EIA") for the purchase of
Evergreen Helicopters, Inc. ("EHI") for $250 million.
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The transaction payment comprises of $185 million cash, $17.5
million in unsecured promissory notes issued by Erickson
Air-Crane and approximately four million convertible preferred
shares of Erickson Air-Crane based on an agreed value of $11.85
per share worth $47.5 million. If Erickson so wants, it can
convert these preferred shares into common shares, subject to
shareholder approval under NASDAQ marketplace rules.
Post-acquisition, the company might look for this option.
Based on certain revenue targets for calendar years 2013, 2014
and 2015, the company would also have to pay a contingent
consideration of up to $26.3 million to EIA, either in cash or
The acquisition is expected to close during the second quarter of
2013. However, the completion of the business depends on the
company receiving appropriate financing and certain customary
Evergreen Helicopters is a diversified global provider of air
transport services for cargo and personnel to government and
commercial customers. It is geographically diversified with its
presence in North America, the Middle East, Africa, and Asia
Pacific. In calendar year 2012, EHI's unaudited revenue and
adjusted EBITDA was $196.0 million and $56.2 million,
With this transaction, Erickson is adding back its amortization
of certain capitalized overhaul costs, resulting in 2012 adjusted
EBITDA of $57.2 million versus the reported EBITDA of $44.5
The acquisition of EHI would provide Erickson Air-Crane with an
incremental fleet of 64 aircrafts that comprises of both
helicopters and fixed-wing airplanes. This diverse fleet serves a
wide range of customers which includes significant passenger
transport and airlift services for the US military.
In Nov 2012, the company had announced the acquisition of Air
Amazonia. With Air Amazonia and EHI, Erickson would generate pro
forma 2012 revenues of approximately $430 million and EBITDA
margins of 25%. The combined business would operate a diverse
fleet of 100 aircrafts. These acquisitions would bring in
synergies and significant opportunities for incremental growth in
the near as well as the long term. Moreover, the combination of
these three businesses would diversify end markets, regions
serviced, mission capabilities and aircraft types.
In 2012, the company had also completed the purchase of Sun Bird
Aircraft and associated spare parts inventory and accessories
from SDG&E, a subsidiary of
). The Sun Bird is an Erickson model S-64F Aircrane that was
originally purchased by SDG&E from Erickson Air-Crane in
2009. This transaction will allow the company to take advantage
of market opportunities in 2013 and beyond in the oil-and-gas and
power line construction sectors of the business in South America
As far as liquidity is concerned, the company is well positioned
to go ahead with these deals. Erickson Air-Crane ended full year
2012 with cash and cash equivalents of approximately $1.47
million, compared with $0.268 million at the end of full year
2011. Long-term debt fell to $26.7 million at the end of full
year 2012 from $124.0 million at the end of full year 2011.
However, going forward, the expected cutbacks in the U.S. defense
budgets and political uncertainty remain a matter of concern for
Erickson Air-Crane. The company presently retains a Zacks Rank #3
Other stocks worth considering are
The Boeing Company
Lockheed Martin Corporation
), both with a Zacks Rank #2 (Buy).