BBA Aviation and Dubai Aerospace Enterprise (DAE) are exploring possibly merging certain parts of their businesses, a combination that, depending how much of the businesses would be merged, could create one of the largest independent engine and airframe maintenance, repair and overhaul (MRO) entities, with annual revenues approaching $2.5 billion.
Both BBA and DAE this week confirmed rumored reports that the two entities were in talks. DAE calls the discussions on a “potential combination of certain parts of its business” preliminary and says there are no other details at this time. BBA adds that “there can be no assurance that the discussions will result in a transaction.”
The companies did not discuss which portions of their respective businesses would be included in a merger, or how much of a stake each would hold. But the combination would not come as a complete surprise since DAE has been rumored for some time as wanting to either spin off, sell or look at other options for its StandardAero business. BBA, meanwhile, has been on an aggressive acquisition trail, and a merger with StandardAero could triple its aftermarket revenue base.
DAE, founded in 2006 with the backing of the Dubai government, acquired StandardAero from The Carlyle Group in 2007 as part of a $1.9 billion deal that included the Landmark Aviation chain of fixed-base operations. DAE later sold the FBOs for $400 million.
DAE originally had ambitions to branch into a range of aviation and aerospace markets, but scaled back those plans during the global market downturn. Rumors surfaced in 2010 that DAE was looking to sell the company. This raised speculation that DAE wanted to get out of the MRO business. Company executives dismissed the speculation at the time, saying StandardAero was not on the auction block “per se.” But DAE did sell its 30% stake in MRO firmto Mubadalla in 2011.
StandardAero, however, has remained a strong performer for DAE, generating annual revenues of more than $1.6 billion through a network of 13 facilities in the U.S., Canada, Europe, Singapore and Australia. The company provides engine and airframe MRO services, engineering services and completions. Its customer base ranges from business and general aviation, VIP, airline, military and helicopter operators to the components and energy markets.
In the completions market, StandardAero owns Dallas-based Associated Air Center, one of the most established centers specializing in VIP/VVIP aircraft. DAE, headquartered in Dubai, is also in the aircraft leasing business, employing a combined 3,700 workers.
In its most recent financial, the company reported that revenue increased from $1.8 billion in fiscal 2011 to $1.94 billion in fiscal 2012, and DAE Managing Director Khalifa AlDaboos had said: “Our business prospects are strong, and the company is poised for growth in 2013 and beyond.”
As for BBA, it has been rapidly growing its flight support business (including) and making strategic investments for its aftermarket services business, which includes Dallas Airmotive, Premier Turbines, H+S Aviation, International Turbine Service, W.H. Barrett Turbine Engine Company, International Governor Services, Ontic and APPH. Its aftermarket services business brought in $857.1 million in 2012, up from $806.6 million a year earlier, including the acquisition of the former Consolidated Turbine Services work. The Engine Repair and Overhaul accounted for $641.2 million of that business. Including its flight support business, BBA’s revenues totaled nearly $2.2 billion in fiscal 2012.