Erickson Air-Crane, Inc.
) has entered into a definitive purchase agreement with HRT
Participações em Petróleo S.A. ("HRT") to acquire its aviation
services division, Air Amazonia Serviços Aeronauticos Ltda. ("Air
Amazonia"). Also, per the agreement, the company will take
possession of a fleet of six aircraft and ground facilities of
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The transaction is expected to be completed in the third quarter
of 2013. At the close of the transaction, the company will pay
$23 million while it will pay an additional $3 million within one
year of closing.
The company plans to fund the initial purchase price from its
existing revolving credit facility and intends to release the $45
million cash held in escrow under the notes offering. With
excellent use of capital, the transaction will be immediately
accretive to the company's business.
The agreement also calls for a five-year aerial services contract
from HRT that will bring in revenues of $29 million annually. Per
the contract, the company will provide rotary-wing aircraft
services to support HRT's oil & gas activities in the
Solimoes region. The contract includes annual renewal options.
In order to execute the contract, the company intends to utilize
a fleet of 6 rotary-wing aircraft of varying types and mission
capabilities acquired from HRT. Also, the company will make use
of 2 aircraft from its fleet that are currently idle.
Erickson Air-Crane has been making judicious acquisitions. The
acquisition of Evergreen Helicopters in May this year, followed
by the current announcement will strengthen the company's
business. Specifically, the acquisition of Air Amazonia will help
the company to continue to expand into the South American oil and
Evergreen Helicopters has also fetched renewed contracts for the
company. In July this year, the company received a contract
extension from the U.S. Army's Garrison in Hawaii for the supply
of rotary wing aerial services to support air medical evacuation
and training activities. Previously, it received two contract
extensions with Special Operations Command Africa. Per the
contract, Evergreen Helicopters will provide a fleet of fixed and
rotary wing aircraft for personnel and cargo transport for the
Department of Defense in Central Africa.
Despite back-to-back contracts and acquisitions, Erickson
Air-Crane like its peers
General Dynamics Corp.
Lockheed Martin Corp.
) faces the risk of defense budget uncertainty and sequestration.
Erickson Air-Crane presently retains a short-term Zacks Rank #3
Erickson Air-Crane is expected to release its second quarter 2013
results on Jul 29, 2013. The Zacks Consensus Estimate for the
quarter is 28 cents per share.
In the near term, we would advise investors to accumulate its
short-term Zacks Rank #2 (Buy) peer
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