Chorus Aviation Inc. (CHR-T) says it has reached a deal to sell its underperforming Britain-based aircraft leasing division for $814-million, a little over two years after acquiring it.
Colin Copp, chief executive officer of Halifax’s Chorus, said the sale of Falko Regional Aircraft Ltd. and its related assets to U.S.-based HPS Investment Partners LLC is expected to be completed by the end of the year.
Mr. Copp said Falko, which leases more than 200 commercial aircraft to airlines around the world, did not bring the returns he expected. And investors did not see the business’s value reflected in the stock price. Chorus began a formal sale process after receiving unsolicited offers for Falko and all of Chorus in 2023, Mr. Copp told analysts on a conference call on Tuesday.
He said they decided to sell Falko to reduce debt, provide shareholder returns and focus on growth in its other divisions, Jazz Aviation, Cygnet Aviation Academy and Voyageur Airways, which serve United Nations and NATO in Africa and elsewhere. Jazz Aviation provides regional service for Air Canada with a fleet of 100 planes and a staff of 4,500.
“We looked at our options and we did a lot of evaluation, a lot of analysis,” Mr. Copp said. “It wasn’t just something that popped up and we decided to go with it.”
Including debt assumed by the buyers, the sale announced on Tuesday is valued at $1.9-billion and is subject to shareholder and regulatory approvals. Mr. Copp says the deal has the backing of Chorus’s two biggest common shareholders, Air Canada and Brookfield Asset Management Ltd.
New York-based HPS is an investment company with US$116-billion in assets under management and offices around the world.
Chorus bought Falko in early 2022 for $616-million, excluding debt.
Chorus made a profit of $101-million in 2023, up from $49-million in 2022. The regional aircraft leasing division accounted for $281-million of Chorus’s $1.7-billion revenue in 2023, and lost $230,000.
James McGarragle, a Royal Bank of Canada stock analyst, said the deal is a positive one for Chorus, reducing its debt to pave the way for shareholder returns. In a note to clients, he noted the cash injection exceeds Chorus’s market value of $537-million on July 29.
Chorus’s share price fell by 2.5 per cent on the Toronto Stock Exchange on Tuesday, giving back earlier gains for a year-to-date increase of about 14 per cent.