Asset manager The Carlyle Group is set to retake ownership of one of the nation’s largest fixed-base operation (FBO) chains that it helped create over nearly three decades. But its reacquisition of Landmark Aviation is coming at a price that is believed to be $200 million more than when Carlyle sold the chain five years ago.
Carlyle and Landmark owners GTCR and Platform Partners announced the sale late Sept. 14, but did not disclose terms of the agreement. The transaction, which will be paid for through a Carlyle Partners $13.7 billion buyout fund, is expected to close in the fourth quarter.
Carlyle sold Landmark under a $1.9 billion package deal that also included StandardAero in August 2007 to Dubai Aerospace.
In that deal, the piece involving Landmark’s FBOs was expected to be valued at just more than $400 million. Dubai Aerospace turned around seven months later and sold the FBOs to equity fund manager GTCR and Platform Partners-backed Encore.
Carlyle this month emerged as the winning bidder for the chain over what is believed to have been a handful of other interested parties – mostly equity and other financial firms. The sale price is believed to be $625 million.
GTCR and Platform Partners bought the chain near the height of the market and managed it during the prolonged downturn – but still grew and strengthened it. The entity increased by more than 25% with bases in the U.S., Canada and France.
“Under our ownership, we expanded the network from 38 to 51 sites, acquiring nine new sites, and won open competitions at four sites where the airports had incumbent FBO leases expiring,” says GTCR Principal Craig Bondy.
“Most importantly, the new locations we added were much more strategic and high profile, largely in higher traffic ‘NFL’ cities like Miami, Atlanta, San Diego, Cincinnati etc., which dramatically enhanced the strategic quality of the network from what we started with (which were mostly tertiary cities).”
But GTCR – a private equity fund – says that for Landmark to be successful, it requires continued access to capital. Bondy says the current owners had exhausted their resources set aside for the chain. In fact, much of the chain’s growth had occurred in 2010 and 2011, and seemingly slowed this year.
Carlyle already has stressed a strong interest in continuing the growth pattern of the chain, stating it planned to work with the existing management team to expand and renovate current facilities, along with adding new locations through acquisition and Greenfield developments. “We look forward to partnering with Landmark’s experienced and talented management team to accelerate the growth of the company’s FBO network,” says Adam Palmer, Carlyle managing director and head of the Global Aerospace, Defense and Government Services team.
Carlyle says it is partnering with the management team in the acquisition, and Palmer credits the chain for establishing “a strong reputation in the business aviation industry for its emphasis on safety and customer service.”
It’s the chain’s management that makes Landmark an attractive purchase, says Jim Haynes, a longtime industry veteran who founded and is president of the consultancy The Aviation Group. “I think Carlyle bought a great company and a great management team,” he says, adding that the prevailing sentiment is Carlyle “got a good deal.”
The business Carlyle is repurchasing is much different than the one it sold five years ago, Haynes says. It is larger, and in bigger markets with stronger infrastructure.
Carlyle is buying during a time when the industry is near bottom – FBO margins are thin and “no one is flying,” notes Haynes. But many industry leaders are optimistic that the industry is picking up, and that the Landmark chain is poised to become stronger and more lucrative for Carlyle.
Carlyle’s Role In Landmark
Carlyle has a nearly three-decade history of acquiring aerospace firms, strengthening them and then spinning them off or selling them. The Global Aerospace, Defense and Government Services group has invested about $4.2 billion in more than 40 aerospace and defense companies since 1987, and currently owns or holds stakes in Arinc and Wesco.
How long Carlyle will hold onto the chain is unknown, but the company played a major role in the formation of what is now Landmark. Carlyle’s interest spans back to the late 1980s, originally with a Hawthorne Aviation facility at Dulles International Airport. In the late 1990s, Carlyle financed the merger of Hawthorne Aviation, Piedmont Aviation Services and American Beechcraft into a single entity, forming a company with annual revenues of more than $170 million and 1,200 employees. The new company became Piedmont Hawthorne Aviation.
Carlyle picked up Garrett Aviation in 2004 and combined the entity with Piedmont Hawthorne Aviation. Carlyle at the time was thought to have originally searched for a buyer for Piedmont Hawthorne. Instead, Garrett and Piedmont Hawthorne combined with another Carlyle owned asset – Associated Air Center – into what became Garrett/Piedmont Hawthorne/Associated. That group rebranded to Landmark in 2005.
When the group was sold to Dubai Aerospace, Dubai separated out the maintenance, repair and overhaul pieces of Landmark, choosing to sell the FBO business only.