AAR (NYSE: AIR) today announced it has agreed to sell its Telair Cargo Group to TransDigm for a purchase price of $725 million in cash, subject to adjustments. The Telair Cargo Group is comprised of Telair International, Telair U.S., and Nordisk Aviation Products. AAR will report its Telair Cargo Group as discontinued operations beginning in the third quarter of FY 2015 and the sale is expected to close in the fourth quarter ending May 31, 2015, subject to regulatory approval. When the sale closes, AAR expects to report a pre-tax gain of approximately $200 million after expenses and fees.
AAR further announced its intention to sell its unprofitable Precision Systems Manufacturing business and will report it as a discontinued operation and record an impairment charge of approximately $40 million in the third quarter of FY 2015.
"These transactions are an important strategic step positioning AAR as a pure-play, industry-leading global aviation services company and will allow us to focus our attention where we see the best opportunities for the Company," said David P. Storch, Chairman and Chief Executive Officer of AAR. "We also expect the sale will create value for our shareholders by crystalizing our valuation, improving AAR's overall return profile, and reshaping our balance sheet while returning capital to shareholders."
As a result of these transactions, the Company will report its results in two new segments:
Storch continued, "We are very pleased with the double-digit organic growth rate we are experiencing in our new Aviation Services segment and excited by our prospects going forward. And while revenues and earnings in our new Expeditionary Services segment have decreased significantly from the prior year, we have confidence in our industry-leading positions and see substantial opportunities ahead."
The Company also announced today that its third-quarter results will be less than expected due to fewer flying positions in its Airlift operation, costs associated with this transaction, and bid costs for large government contracts.
Citi served as exclusive financial advisor and Winston & Strawn LLP as legal advisor to AAR CORP. on the sale of the Telair Cargo Group. They will also serve as advisors on the sale of Precision Systems Manufacturing.
Source: AAR Corporation (NYSE: AIR)
Date: Feb 23, 2015